The Financial Crimes Enforcement Network (FinCEN) today fined J.P. Morgan Chase Bank, N.A. $461 million for willfully violating the Bank Secrecy Act (BSA) by failing to report suspicious transactions arising out of Bernard L. Madoff’s decades-long, multi-billion dollar fraudulent investment scheme. In consenting to the assessment of a civil money penalty, JPMorgan admitted to the facts set forth by FinCEN and that its conduct violated the Bank Secrecy Act.
“When JPMorgan suspected Mr. Madoff’s fraud, it focused on its own investment exposure and saved itself approximately $250 million,” noted FinCEN Director Jennifer Shasky Calvery. “If it had given the same attention to its anti-money laundering responsibilities, it could have saved itself $2 billion, and potentially saved thousands of other fraud victims untold misery and loss.”…
In 2007, JPMorgan had concerns that BLM could be engaged in fraud that culminated in the identification of several “red flags” by 2008. These red flags included: (1) BLM’s investment performance appeared too good to be true; (2) BLM’s trading techniques and investment activity lacked expected transparency; (3) BLM used a small, unknown auditor; and (4) BLM repeatedly refused to provide full information to JPMorgan as part of its due diligence reviews. In the Fall of 2008, JPMorgan took steps to protect its own business interests yet failed to notify FinCEN of the same suspicious, potentially fraudulent, activities and failed to file any Suspicious Activity Report (SAR) with FinCEN as required by the BSA.
In October 2008, JPMorgan filed a SAR-equivalent with FinCEN’s counterpart in the United Kingdom, the Serious Organised Crime Agency, identifying their concerns about potential fraud. JPMorgan did not file a SAR with FinCEN until after Mr. Madoff’s arrest in December 2008. During the intervening time, JPMorgan redeemed approximately $275 million of its own investments from the BLM feeder funds, which in turn drew the funds out of BLM’s JPMorgan accounts in the United States. Mr. Madoff also drained billions of dollars out of BLM’s JPMorgan accounts during this time period. When Mr. Madoff was arrested on December 11, 2008, JPMorgan booked a loss of approximately $40 million, substantially less than it would have lost but for its transactions in the Fall of 2008.
Detailed press release from FinCEN: click here