The UK’s Financial Reporting Council (FRC) has proposed a fine of £12.5m ($15.83m) for KPMG UK in relation to its audit of Bank of New York Mellon (BNY Mellon).

If the fine is implemented by the FRC’s disciplinary tribunal it will be the largest fine levied in the regulator’s history.

KPMG and one of its partners, Richard Hinton are being scrutinised by the tribunal hearing in relation to their client asset sourcebook (CASS) audit of BNY Mellon London branch and BNY Mellon International for the year ended 31 December 2011.

KPMG and Hinton admitted to the misconduct in relation to the audits in September 2018. They admitted that they failed to give adequate consideration as to whether the records of custody relationships maintained by BNY Mellon Group were compliant with CASS Rules.

The FRC, which is due to be replaced by the Audit, Reporting and Governance Authority (ARGA), has been considered to be weak in the level of sanctions it levies against audit firms. At the time of the report into collapsed construction company Carillion it was described as being timid and too close to those which it regulates.

A KPMG spokesperson said: “We accept and regret that some of our work did not fully reflect all aspects of the new guidance applicable to Client Assets Reports issued by the FRC in 2011. Since that time, there has been further fundamental change in the regulatory environment and we have significantly enhanced our CASS procedures and training to reflect this.

“We are committed to cooperating 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.

“As these proceedings are ongoing, we are unable to comment further.”