KPMG fined AGAIN over banking fiasco
DISGRACED beancounter KPMG was last night facing yet another fine from the regulators – this time for a record £12.5m.
In the latest blow to its reputation, the auditor was accused of ‘truly exceptional’ misconduct by the Financial Reporting Council (FRC) in a hearing about its work for American banking firm BNY Mellon.
The bank was found to have not properly separated its customers’ money from the rest of its business, meaning they could have been exposed to undue risk.
It prompted a three-year probe by the FRC into KPMG’s role in the scandal, which found the auditor had failed to properly consider the rules around keeping customer money separate.
The regulator is now pressing for KPMG to pay a fine of at least £12.5m, saying that its failures risked the possible insolvency of the bank.
But KPMG’s lawyers have branded that figure ‘extravagant’ and ‘gargantuan’, suggesting it should be as little as £1.4m. It comes after the firm and Richard Hinton, the partner who oversaw BNY audits, admitted misconduct in September.
KPMG, which is led in the UK by chairman and senior partner Bill Michael ( pictured), has already paid out more than £15m of fines in the past year for work carried out for the Co-operative Bank, Equity Red Star, Ted Baker and Quindell. The latest proposed penalty would take this total to nearly £28m.
But speaking for KPMG, at a tribunal to decide the size of the penalty, lawyer Bankim Thanki said the misconduct had been unintentional and was not criminal.
The tribunal is set to continue this week, with a panel chaired by former top lawyer Sir Stanley Burton due to decide on what the final penalty should be.
There is no upper limit on the fines that can be imposed.
The FRC, which is stuffed with former staff from UK auditors, has been demanding higher sums after it was accused by MPs of being too cosy with big accounting firms. It is now being scrapped and replaced with a new watchdog.
A spokesman for the FRC yesterday declined to comment on the proceedings.
Last night a KPMG spokesman said the firm accepted that some of its work did not meet guidance issued by the FRC in 2011. But she added: ‘Since that time, there has been further fundamental change in the regulatory environment and we have significantly enhanced our procedures and training to reflect this.
‘We are committed to co-operating with our regulator to bring these historic cases to conclusion as swiftly as possible.
‘ However, in this instance we could not agree with the FRC on the level of appropriate sanctions, which will now be determined by an independent tribunal.’
The penalties KPMG has received so far over misconduct are a drop in the ocean compared to its annual revenues – £2.3bn in the UK last year.
Partners took home an average of £601,000 each.
The firm is still being investigated by the FRC over its audit of collapsed construction company Carillion.
Along with the collapse of BHS, the scandal led to radical reforms being proposed for the audit sector.