KPMG is under investigation by the U.K.'s Financial Reporting Council, the country's independent corporate governance regulator, for its conduct in auditing Bank of New York Mellon, which settled earlier this year with the U.K. government's regulatory agency for custody rule violations.
The FRC said in a news release it would investigate how KPMG audited client money arrangements at BNY Mellon International, the custody bank's U.K.-based subsidiary; and BNY Mellon's London branch of the New York-based bank.
In April, BNY Mellon agreed to pay £126 million ($196 million) in a settlement with the U.K.'s Financial Conduct Authority for violations of the agency's custody rules regarding the custodian's records from November 2007 to mid-August 2013.
BNY Mellon's London branch and BNY Mellon International did not adequately record, reconcile and protect safe-custody assets, the FCA said at the time. BNY Mellon said the companies have implemented new policies and operational procedures to comply with FCA custody rules.
Erfan Hussain, KPMG spokesman in London, said the firm would cooperate fully in the FRC investigation.