The settlement includes a so-called deferred prosecution agreement that requires the bank to acknowledge failures in its protections against money laundering but also allows it to avoid criminal charges. No individual executives were accused of wrongdoing.
The agreement resolves two felony violations of the Bank Secrecy Act in connection with the bank’s relationship with Bernard L. Madoff Investment Securities, the private investment arm of Madoff’s former business.
The Treasury Department’s civil penalty was assessed because the bank failed to pass along to U.S. authorities suspicions about Madoff it had reported to Britain’s Serious Organised Crime Agency, and because the bank failed to detect and report other cases of suspicious activity, including more than $2 billion in transactions involving the Puerto Rican affiliate of an unidentified Venezuelan bank, authorities said.
Under the agreement, criminal charges will be deferred for two years as JPMorgan admits to its conduct, pays the $1.7 billion a fund established for victims of Madoff’s fraud and reforms its anti-money laundering policies, prosecutors said.
A statement of facts included in the agreement describes internal communications at JPMorgan expressing concerns about how Madoff was generating his purported returns. As early as 1998, a JPMorgan fund manager wrote that the returns were “possibly too good to be true” and there were “too many red flags.”
In more recent years, executives were disturbed by the fact that Madoff wouldn’t let the bank examine his books, according to the statement of facts.
“How much do we have in Madoff at the moment?” a bank analyst wrote in a 2008 email. “To be honest, the more I think about it, the more concerned I am.”
In a statement, JPMorgan said it recognized it “could have done a better job pulling together various pieces of information and concerns about Madoff” but didn’t believe any of its employees knowingly assisted the scam.