Summary
JPMorgan Chase & Co. (JPM) filed an 8-K on January 7, 2014, detailing significant settlements by its bank subsidiaries to resolve investigations and litigation related to the Bernard L. Madoff Investment Securities LLC (BLMIS) fraud. The core of the announcement is the Deferred Prosecution Agreement (DPA) entered into by JPMorgan Chase Bank, N.A. with the U.S. Attorney's Office for the Southern District of New York. Under the DPA, JPMorgan Chase Bank agreed to forfeit $1.7 billion to the U.S. government, a non-tax-deductible payment intended for distribution to victims of the Madoff fraud. The bank also admitted to failures in its anti-money laundering program and its reporting of suspicious activity concerning BLMIS. The DPA allows for the dismissal of charges after a two-year compliance period, provided the bank meets its obligations. In addition to the DPA, JPM's subsidiaries consented to substantial civil money penalties from the Office of the Comptroller of the Currency ($350 million) and the Financial Crimes Enforcement Network ($461 million), with the FinCEN penalty being satisfied by the forfeiture payment.
Key Highlights
- 1JPMorgan Chase Bank, N.A. entered into a Deferred Prosecution Agreement (DPA) with the U.S. Attorney's Office for the Southern District of New York.
- 2The bank agreed to forfeit $1.7 billion to the U.S. government as a non-tax-deductible payment to victims of the BLMIS fraud.
- 3JPMorgan Chase Bank admitted to violations of the Bank Secrecy Act, including failure to maintain an adequate anti-money laundering program and failure to file a Suspicious Activity Report (SAR) related to BLMIS.
- 4The DPA involves a two-year deferral of prosecution, with potential dismissal of charges if the bank complies with its obligations.
- 5JPM subsidiaries agreed to pay a $350 million Civil Money Penalty to the OCC for Bank Secrecy Act/Anti-Money Laundering deficiencies.
- 6JPMorgan Chase Bank agreed to a $461 million Civil Money Penalty from FinCEN for failing to detect and report suspicious transactions related to BLMIS, which is satisfied by the $1.7 billion forfeiture.
- 7The firm also reached settlements with the BLMIS trustee and class action plaintiffs, agreeing to pay a total of $543 million ($325 million to the trustee, $218 million to class plaintiffs) plus legal fees, subject to court approval, to resolve related civil claims.