J.P. Morgan Chase Bank NA on Tuesday was fined a total of $2.05 billion by three federal agencies for violations of the Bank Secrecy Act in connection with investments it made on behalf of clients in strategies managed by Bernard L. Madoff Investment Securities LLC.
The Justice Department charged J.P. Morgan Chase Bank with two felonies — failure to maintain an effective anti-money-laundering program and failure to file a suspicious activity report regarding BLMIS activities — but deferred the charges for two years under an agreement announced by Preetinder Singh “Preet” Bharara, U.S. Attorney in Manhattan.
The agreement requires the bank to pay a $1.7 billion penalty to the victims of Bernard L. Madoff's Ponzi scheme; to accept responsibility for its conduct; to refrain from future criminal conduct; to cooperate with authorities; and to continue to reform its anti-money-laundering compliance program, according to a news release from Mr. Bharara's office.
If J.P. Morgan Chase Bank complies with the agreement for two years, Mr. Bharara said his office will seek to dismiss the criminal charges.
Additionally, the Office of the Comptroller of the Currency assessed a $350 million civil penalty against J.P. Morgan Chase Bank and affiliates for Bank Secrecy Act violations, according to a news release from the comptroller's office.
“The OCC found critical and widespread deficiencies in the (bank and its affiliates' Bank Secrecy Act) and anti-money-laundering compliance programs,” the news release said.
“The penalty is based in part on J.P. Morgan Chase's failure to report suspicions about Bernard L. Madoff Investment Securities LLC to U.S. enforcement and regulators,” despite having alerted U.K. authorities in October 2008 of suspicious activity by Mr. Madoff, OCC's release said.
Separately, the Financial Crimes Enforcement Network announced on Tuesday that J.P. Morgan Chase Bank admitted to “willfully violating the Bank Secrecy Act” and fined the bank $461 million, according to a FinCEN news release.
FinCEN said its penalty had been satisfied with the $1.7 billion penalty negotiated by Mr. Bharara's office.
J.P. Morgan Chase Bank said in a statement: “We recognize we could have done a better job pulling together various pieces of information and concerns about Madoff from different parts of the bank over time. We filed a Suspicious Activity Reports in the U.K. in late October 2008, but not in the U.S. … We do not believe that any J.P. Morgan Chase employee knowingly assisted Madoff's Ponzi scheme.”
“The firm is making significant efforts to strengthen our (suspicious activity reporting) practices across the board to be best-in-class. We believe the lessons we have learned will make us a stronger company,” the statement went on to say.
Also on Tuesday, Irving H. Picard, the Securities Investor Protection Act's trustee for the liquidation of Mr. Madoff's company, announced a financial settlement totaling $543 million with J.P. Morgan Chase Bank to recover losses on behalf of Madoff Ponzi scheme victims, according to a statement by Mr. Picard's office.
U.S. Bankruptcy Court in Manhattan must approve Mr. Picard's recommended settlements for $325 million and $218 million.