JPMorgan to pay over USD 2 billion in Madoff fraud

JPMorgan Chase & Co, already beset by other costly legal woes, will pay over USD 2 billion for ignoring obvious warning signs of Bernard Madoff's massive Ponzi scheme, authorities said today.
The bank will pay USD 1.7 billion to settle criminal charges and a USD 350 million civil penalty for what the Treasury Department called "critical and widespread deficiencies" in its programs to prevent money laundering and other suspicious activity.
George Venizelos, head of the FBI's New York office, said the company failed to carry out its legal obligations while Madoff "built his massive house of cards."
"It took until after the arrest of Madoff, one of the worst crooks this office has ever seen, for JP Morgan to alert authorities to what the world already knew," he said in a statement.

JPMorgan, the primary bank through which Madoff operated since 1986, withdrew about $300 million of its own money from Madoff feeder funds in late 2008, soon after the bank's London desk circulated a memo describing JPMorgan's inability to validate Madoff's trading activity or custody of assets and his "odd choice" of a one-man accounting firm, the government said.
US Attorney Preet Bharara said in a release that "JPMorgan connected the dots when it mattered to its own profit, but was not so diligent otherwise."

He added that financial institutions "must exercise due care not only with their own money but with other people's money also."

The USD 1.7 billion represents the largest forfeiture by a US bank and the largest Department of Justice penalty for a Bank Secrecy Act violation, the government said.
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 civil penalty was imposed by the Treasury Department's Office of the Comptroller of the Currency.

The government said the civil penalty was assessed because the bank failed to pass along to US 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 USD 2 billion in transactions involving the Puerto Rican affiliate of an unidentified Venezuelan bank.