More bad news for Jamie.
JPMorgan, BofA Face Federal Money Laundering Probe
New York Times
Federal and state authorities are investigating a handful of major American banks for failing to monitor cash transactions in and out of their branches, a lapse that may have enabled drug dealers and terrorists to launder tainted money, according to officials who spoke on the condition of anonymity.
These officials say they are beginning one of the most aggressive crackdowns on money-laundering in decades, intended to send a signal to the nation’s biggest banks that weak compliance is unacceptable.
Regulators, led by the Office of the Comptroller of the Currency, are close to taking action against JPMorgan Chase for insufficient safeguards, the officials said. The agency is also scrutinizing several other Wall Street giants, including Bank of America.
The comptroller’s office could issue a cease-and-desist order to JPMorgan in coming months, an action that would force the bank to plug any gaps in oversight, according to several people knowledgeable about the matter. But the agency, which oversees the nation’s biggest banks, has not yet completed its case. JPMorgan is in the spotlight partly because federal authorities accused the bank last year of transferring money in violation of United States sanctions against Cuba and Iran.
In addition to the comptroller, prosecutors from the Justice Department and the Manhattan district attorney’s office are investigating several financial institutions in the United States for criminal activity, according to law enforcement officials.
In April, the regulator issued a cease-and-desist order against Citigroup for gaps in its oversight of cash transactions. The order cited “internal control weaknesses including the incomplete identification of high-risk customers in multiple areas of the bank.” A person close to the bank attributed part of the problem to an accident when a computer was unplugged from anti-money-laundering systems.
Any regulatory action against JPMorgan would be another black eye for its chief executive, Jamie Dimon, and the bank, which was rattled this spring by a $5.8 billion trading loss. That misstep brought additional scrutiny of the bank’s risk controls and compliance efforts.
Last year, JPMorgan agreed to pay $88.3 million to the Treasury Department, which had accused the bank of thwarting United States sanctions by processing roughly $178.5 million for Cubans in 2005 and 2006. Even after bank officials spotted the questionable transactions in 2005, the Treasury said, they failed to report the problem to federal authorities. JPMorgan also made an improper $2.9 million loan in 2009 to a bank tied to Iran’s government-owned shipping line, according to the Treasury Department.
In a 2011 statement, Treasury officials called the bank’s actions “egregious,” adding that JPMorgan’s “managers and supervisors acted with knowledge of the conduct constituting the apparent violations and recklessly failed to exercise a minimal degree of caution or care.” At the time, JPMorgan said that it had not dealt directly with institutions in Cuba and Iran and that it had merely acted as a middleman.
Earlier this summer, British bank HSBC Holdings Plc set aside $700 million to cover investigations that could result in one of the biggest ever settlements or fines. A U.S. Senate report criticized a "pervasively polluted" culture at the bank. The Senate panel examined transactions tied to Mexico, Iran, the Cayman Islands and Saudi Arabia.
Last month, New York's banking regulator reached a $340 million settlement with British bank Standard Chartered Plc after the regulator investigated transactions tied to Iran.
Here's the best analysis we've seen of this story:
When I first read that the government was going to investigate JP Morgan Chase for money laundering, I thought this was another case where the government continued to give wrist slaps–in the form of softball fines–to banks for behavior that never really changed. And to some degree that will be the case. After all, little more than a year ago Treasury’s Office of Foreign Assets Control accused Jamie Dimon’s company of a whole slew of things, including sending Iran a ton (literally) of gold bullion. And in spite of the fact OFAC said JPMC substantially cooperated with their investigation so they could give it a softball fine, the settlement actually made it clear they had done anything but. Though the softball fine may have also had something to do with what I suspect was cooperation on setting up the Scary Iran Plot.
Photos by William Banzai