leaprate.com | January 9, 2014
By Victor Golovtchenko
The never-ending story of banking industry heavyweights getting hefty fines goes on with yet another twist. First it was the uncovering of mortgage fraud, then the Libor scandal, followed by the London Whale and now we still have an ongoing investigation surrounding the 4pm London FX fix. Uncertainty surrounding another lawsuit against the biggest US bank is dissipating with a settlement involving Bernie Madoff's giant Ponzi scheme.
The price tag that JP Morgan will pay is about $2.6 billion which comprises about two weeks of revenue for the company. Chase was the primary bank that Bernie Madoff used in his fraudulent endeavors that caused one of the biggest scandals in the financial industry’s history. The company will pay to the government $1.7 billion, $300 million to the Office of the Comptroller of the Currency and $543 million for private claims.
According to the prosecution JP Morgan failed as an institution by allowing Bernie Madoff and his associates to launder billions of dollars in Ponzi proceeds from a single set of accounts at the bank. Leading prosecutor on the case Preet Bharara stated in a press conference that the anti-money laundering procedures in place at the bank were completely inadequate as they freely allowed roundtrip transactions on his account.
In an unusual event the bank has actually admitted to wrongdoing and committed to fully cooperate with authorities and upgrade its anti-money laundering procedures. In the period between 1986 and 2008 the bank received $150 billion dollars in deposits and transactions linked to Madoff Securities’ accounts raising all types of questions, yet as you might already imagine it never asked any.
Proceeds from the fines will be distributed to Madoff’s victims, while the company has escaped criminal charges by the US Department of Justice by agreeing to reform its policies and practices. An easy let go if you consider the ramifications of the wrongdoings, however there was not much that the government could do at this point in time – the systemic importance of the biggest US bank is of utmost importance and we all know how criminal charges affect public companies.
Not only too big to fail, but too big to be criminalized – good luck to the smaller institutions in being let go in a similar fashion.
Back to January 2014 Archive
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