JP MORGAN Chase will pay a $1.7 billion (£1bn) penalty to settle charges by US federal authorities that the bank failed to report suspicious activity involving Bernard Madoff’s Ponzi scheme.
As part of the deal, which describes numerous suspicious interactions during the bank’s two-decade relationship with Madoff, JP Morgan is admitting it violated laws requiring it to monitor customer activity for money laundering in the case, authorities said yesterday.
The deal includes a two-year deferred prosecution agreement and settles outstanding probes by two bank regulators into failures in JP Morgan’s anti-money laundering policies. The bank also agreed to improve controls.
A spokesman for JP Morgan said: “We recognise we could have done a better job pulling together various pieces of information and concerns about Madoff from different parts of the bank over time. We filed a suspicious activity report in the UK in late October 2008, but not in the US.”
He added: “We do not believe that any JP Morgan Chase employee knowingly assisted Madoff’s Ponzi scheme.”
As part of the deal, the bank agreed not to apply for a tax deduction or tax credit for the $1.7bn payment. The money will go to the victims of Madoff’s fraud, according to the announcement.
Madoff, through his Bernard L Madoff Investment Securities hedge fund operation, was revealed in December 2008 to be the operator of a massive Ponzi scheme. Convicted in 2009 of defrauding thousands of investors, he is serving a 150-year prison sentence.
Madoff’s is the largest known Ponzi scheme in history. He kept an account at JP Morgan Chase, or banks it had bought, from 1986 until his arrest in December 2008, according to a statement of facts that the bank agreed to for public disclosure.
The account at the bank received deposits and transfers of about $150bn, almost exclusively from investors in Madoff Securities, yet the money was not used to buy securities as Madoff had promised.