It's a new year, but JPMorgan Chase & Co. is dealing with the same old problems.
The banking giant has admitted wrongdoing and agreed to pay a $1.7 billion fine for its involvement with Bernard L. Madoff Investment Securities, the front for the massive Ponzi scheme that defrauded investors of an estimated $65 billion. The settlement will allow Chase to escape any criminal charges for failing to catch signals of fraudulent investing practices.
Supporting documents from the U.S. Department of Justice show that "the Madoff Ponzi scheme was conducted almost exclusively through a demand deposit account and other linked cash and brokerage accounts" at Chase for more than 20 years. While Ponzi schemes have played tricks on plenty of unassuming investors, banks should be another story. The Bank Secrecy Act requires financial institutions to assist government agencies in preventing money laundering. In Chase's case, it's clear that the bank failed to follow the BSA's guidelines.
In addition to the fine, the settlement includes a two-year deferral of prosecution agreement. Over the next two years, the bank must improve its efforts to comply with the BSA. Regulators will review quarterly reports of these efforts and will have access to the bank's nonprivileged books, correspondence, files and other documents. If regulators are satisfied at the end of the term, they will seek dismissal of all related charges.
While it's a massive fine, there will be plenty of critics who continue to be frustrated by the fact that no banking executives will personally pay for the oversight failure.
What do you think? Is a big fine enough, or does the Department of Justice need to seek criminal charges in a case like this?