JPMorgan Chase: Bank faces major regulatory action

(MoneyWatch) JPMorgan Chase (JPM) is likely to face a major regulatory action connected with firm's anti-money laundering and compliance programs. The banks two main regulators, the Office of the Comptroller and the Currency (OCC) and the Federal Reserve, are expected to announce the action as early as today, according to Reuters, which would likely be in the form of a cease and desist order. A cease and desist order is the harshest form of enforcement action that the OCC can issue. While the bank is not expected to pay a monetary penalty, the order could potentially limit the bank's business activities and strategic opportunities. Additionally, the bank will be required to enhance its monitoring and risk surveillance systems and procedures.

JPM CEO Jamie Dimon can't blame this on a "flawed, complex, poorly reviewed, poorly executed and poorly monitored" strategy, like he did when the bank lost $6.2 billion on the so-called "London Whale" trade, which was disclosed in May of last year. At that time, the lapse was described as an uncharacteristic black eye for its charismatic CEO.

In many ways, the current potential regulatory action is worse than any trading loss, because it indicates a systemic lapse in controls. Regulators, who heightened scrutiny in this area months ago, appear to have found a company-wide lapse in procedures and oversight connected to anti-money-laundering (AML) surveillance and risk management. AML controls are intended to deter and detect the misuse of legitimate financial channels for the funding of money laundering, terrorist financing and other criminal acts.

The JPM sanction would be the fourth major AML action in the past 12 months.

Is the increase in AML regulatory sanctions indicative of a spike in the actual funding of these illicit activities? It's hard to say, but that conclusion seems unlikely, according to a veteran compliance professional. "Previously, these types of internal findings that cropped up as a result of ongoing bank regulatory oversight were remediated directly with the banks. In the aftermath of the financial crisis, enhanced scrutiny and political pressure has elevated the findings to public enforcement actions." While in the HSBC case regulators identified a connection to illicit funding, in many cases, regulators find flaws in the surveillance processes themselves.

Whatever benefit of the doubt the banks once had with their regulators is long gone. Matters that were once resolved privately will be on display, for the public to see. While compliance divisions may take that threat seriously, until attitudes and behavior in C-suites and boardrooms shifts more, expect to see a lot more of these actions.

[WomenBizReporter]

I was amazed at Ms. Holvales' response to promote business banking to women. It was like they did not know how valuable an audience women business banking can be. Especially, after Chase Bank was a leader in taking President Obama Bank money and squandering it. But, the one thing I found was repugnate: Ms. Holvales' desire to act as though my suggestion to sponsor the Women Business Report on CBS Radio was ridiculous to share with other minorities in the industry of women businesses. I contacted Jamie Dimond's Office where I met Ms. Tanner his assistant. Would you believe she has sent a letter promising to close my personal bank accounts by April 22, 2013 at noon. Isn't that illegal. I believe their is a customer code which prevents a professional to take their personal gripes against a customer? Or, to take a customer idea to profit without sharing any reward? Now, I just meet on Saturday mornings at McDonald's with women who are interested in how to do business...

[johnlockesghost]

Criminal acts ought to have criminal punishments, otherwise, why bother.

[wildemanne]

finally they get a scolding and a rap on the wrist???????? if that!
what a freakin joke the bank lobby has made out of law

[demongirl60]

They play and WE pay for it....

[twmat311]

When you talk to banking/finance insiders, the tone is not that no one is LIKELY to go to jail - it's that no one WILL go to jail for any of this. As if they know that there is some kind of immunity.

[chevyhotrod]

How the liberal press describe one of their own:

"uncharacteristic black eye for its charismatic CEO"

How the liberal press describe someone else:

Fithy rich, greedy, racist, old white man, anti-American...blah, blah, blah

[wildemanne]

blame libs childish people do this after all chase was a right wingnut major backer wasnt it?

[Tank_Commander]

Ino one goes to jail for this, then it WILL happen again, and again, and again.

[greennnnnn-2009]

They don't seem to care as long as they get their "fine" money. I mean, who cares? Let 'em do whatever the hell they want and just slap 'em with fines. It's the American way for business. Individuals have to live under a different set of laws, however. WE will serve time. Not so for those in companies/corporations. What a crock of shyte.

[cedaly68]

I don't see banks as evil, ill tempered, greedy institutions or whatever you want to call them. I see them as institutions that follow the rules of the market. When the market rules are vague, they will push the rules to earn profits. In cases like this, the rules are actually pretty simple and clear. I think the issue we are seeing with the major banks is that they are just too large to adequately control. In many ways, they are starting to look like the Federal government, they are large, unwieldy and make a lot of costly mistakes. As the article alludes to, I don't think bank behaviors will change until officers are jailed and/or banking licenses are revoked. That's too bad, we need strong banks in this global economy.

[greennnnnn-2009]

"Follow the rules of the market"??? You serious? LMFAO.