JPMorgan Chase & Co. is headquartered in New York and is one of the world’s largest banking and financial-services groups, with major commercial banking, investment banking, payments, asset-management and wealth-management businesses.
The AML comparison in this section should be stated carefully. The principal formal case concerns JPMorgan’s failure to report suspicious activity associated with Bernard Madoff, rather than a finding that JPMorgan itself operated a money-laundering conspiracy.
The Madoff Case
In January 2014, the US Financial Crimes Enforcement Network (FinCEN) fined JPMorgan Chase Bank US$461 million for willfully violating the Bank Secrecy Act by failing to report suspicious transactions arising from Bernard Madoff’s long-running investment fraud.
In consenting to the penalty, JPMorgan admitted the facts set out by FinCEN and acknowledged that its conduct violated the Bank Secrecy Act.
FinCEN’s criticism was particularly significant because concerns about Madoff had arisen within JPMorgan, yet the Bank failed to file the required suspicious activity report with US authorities. FinCEN later observed that this failure deprived law-enforcement and regulatory authorities of information that might have helped expose the fraud earlier.
This was therefore not merely criticism based on hindsight.
It involved an admitted violation of one of the principal statutory mechanisms intended to alert authorities to potentially serious financial crime.
Institutional Outcome
JPMorgan was subjected to substantial financial penalties and required to address the deficiencies identified by regulators.
Yet the violation was attributed to failures in the Bank’s AML reporting and oversight systems.
It was not converted into a finding that the entire international banking organisation possessed a criminal character or should cease operating.
This distinction is important in considering BCCI.
Separate Criminal Conduct - Market Manipulation
JPMorgan subsequently faced criminal proceedings in an entirely different area.
In September 2020, JPMorgan Chase & Co. entered into a three-year Deferred Prosecution Agreement concerning schemes to defraud involving unlawful trading in the precious-metals and US Treasury markets. The institution admitted wire-fraud conduct and agreed to pay approximately US$920.2 million in criminal penalties, disgorgement and victim compensation.
That case was not a money-laundering case and should not be presented as one.
Its relevance is broader.
Serious criminal conduct within particular trading businesses resulted in corporate accountability, financial penalties, a prosecution agreement and prosecutions of individual traders, while the legitimate operations of the wider institution continued.
Distinguishing Misconduct from the Institution
The regulatory and prosecutorial approach was capable of making several distinctions simultaneously:
- JPMorgan had committed serious Bank Secrecy Act violations.
- Particular trading activities involved criminal conduct.
- Individual employees could be prosecuted.
- Institutional systems and controls required correction.
Yet these findings did not become a general proposition that JPMorgan, as an entire international banking organisation, possessed an inherently criminal culture.
The wrongdoing was defined.
The responsible activities and individuals were identified.
The institution was held accountable.
Its legitimate banking operations continued.
Comparison with BCCI
This distinction lies at the centre of the comparison with BCCI.
BCCI was increasingly portrayed after closure through the language of an institution-wide “criminal culture”, despite the need to distinguish misconduct involving particular senior executives, accounts and transactions from the much larger body of conventional banking activity conducted throughout the Group.
The JPMorgan cases demonstrate that regulators and prosecutors can recognise serious institutional responsibility without treating every business, employee and legitimate activity of a major banking group as part of the wrongdoing.
The Double-Standards Question
If willful Bank Secrecy Act violations and serious criminal misconduct within parts of JPMorgan could be attributed to identifiable systems, businesses and individuals while preserving the distinction between wrongdoing and the legitimate institution, why was that distinction more difficult to maintain in the case of BCCI?
A further question follows:
Why could serious failures and criminal conduct at a major established US bank continue to be described as identifiable violations requiring prosecution, penalties and remediation, while allegations involving particular executives, accounts and transactions within BCCI contributed to an institutional characterisation that supported closure of the entire Group?
The comparison does not suggest that JPMorgan and BCCI were factually identical.
It raises the more fundamental question of institutional attribution:
When wrongdoing occurs within a large international bank, should the misconduct be attributed to the responsible individuals, businesses, transactions and control systems-or should it be allowed to define the character and viability of the institution as a whole?
The treatment of JPMorgan demonstrates that regulators are capable of making that distinction.
The question is why comparable weight was not given to it in the case of BCCI.
Also read:
- Financial Crimes Enforcement Network, “JPMorgan Admits Violation of the Bank Secrecy Act for Failed Madoff Oversight; Fined $461 Million by FinCEN”, 7 January 2014. Principal official account of the Bank Secrecy Act violation and penalty.
- US Department of Justice, “JPMorgan Chase & Co. Agrees to Pay $920 Million in Connection with Schemes to Defraud Precious Metals and U.S. Treasuries Markets”, 29 September 2020. Official account of the Deferred Prosecution Agreement and approximately US$920.2 million resolution.
- US Department of Justice, JPMorgan Chase & Co. Deferred Prosecution Agreement. Contains the formal terms and admissions concerning the precious-metals and US Treasury trading schemes.
