JPMorgan faces US order on laundering controls Bank may not have to pay monetary penalty: sources

NEW YORK, Jan 11, (RTRS): US regulators are expected to order JPMorgan Chase & Co to correct lapses in how it polices suspect money flows, two people familiar with the situation said, in the latest move by officials to force banks to tighten their anti money-laundering systems.
The action against JPMorgan, which is expected as soon as Friday, would be in the form of a cease-and-desist order, which regulators use to force banks to improve compliance weaknesses, the sources said. JPMorgan will probably not have to pay a monetary penalty, one of the sources said.
The Office of the Comptroller of the Currency and the Federal Reserve are expected to issue a cease-and-desist order, the sources said. The Treasury Department’s anti money-laundering unit, the Financial Crimes Enforcement Network, also could take a separate action against the bank, they said.
The status of the inquiry could change, and the timing of the action could extend to next week or later.
A JPMorgan spokeswoman declined to comment.
US regulators have been cracking down on lapses at banks on their anti money-laundering controls. Banks are supposed to flag suspect transactions from sanctioned countries or those from customers with ties to drug trafficking or terrorism.
Britain-based bank Standard Chartered Plc agreed to pay a total of $667 million to US and state regulators to resolve anti-money laundering probes, while HSBC Holdings Plc, also headquartered in Britain, agreed in December to pay $1.9 billion to settle a US inquiry.
In April, the Office of the Comptroller of the Currency (OCC) identified major lapses in compliance systems at US bank Citigroup Inc, which did not pay a monetary penalty.
The JPMorgan inquiry dates back several months, the sources said.
The first public signs that JPMorgan had issues with its transaction monitoring systems emerged in August 2011. At that time the largest US bank agreed to pay $88.3 million to settle Treasury Department allegations that it engaged in prohibited transactions linked to Cuba and Iran.
A source familiar with the expected order said JPMorgan did not adequately fix dozens of anti-money laundering issues cited previously by regulators, forcing them to take formal action.
Under the order, JPMorgan is expected to be required to bolster systems it uses to monitor risk and transactions, the sources said.
Regulators enforcing US anti money-laundering laws are required to issue cease-and-desist orders when they instruct a bank to correct Bank Secrecy Act compliance deficiencies and the bank fails to do so in short order. What happens after that, however, varies according to the severity of the bank’s violations.
The terms of a cease-and-desist order, in some cases, can require a bank to review its prior transactions to determine whether it missed any suspicious activity it should have reported to regulators. If a high-enough number of unreported suspicious transactions are found, the regulators may decide to issue a civil money penalty.
While no immediate action is expected from US prosecutors, the OCC typically informs the Justice Department when it undertakes inquiries of this sort, a former comptroller of the currency said.
“I would think that if the agency gets to the point of issuing a cease-and-desist order that they’ve already been in touch with the Justice Department,” said John Hawke. Now a partner at Arnold and Porter in Washington, he said he had no knowledge of the specific case.
A Justice Department spokesman did not immediately respond to a request for comment.
Meanwhile  group of 10 mortgage servicers  earlier in the week  agreed to pay a total of $8.5 billion to end a U.S. government-mandated case-by-case review of housing crisis foreclosures in an  acknowledgement the program had proven too cumbersome and expensive.
Roughly 3.8 million borrowers whose homes were in foreclosure within the time frame of the review will receive cash compensation ranging from hundreds of dollars up to $125,000, depending on the type of errors they experienced, the U.S. Office of the Comptroller of the Currency (OCC) said.
The reviews followed the “robo-signing” scandal that emerged in 2010 involving allegations banks pursued faulty foreclosures by using defective or fraudulent documents.
The OCC and the Federal Reserve Board said they accepted the agreement to get relief to consumers more quickly than through the reviews.
In April 2011, the government required the servicers to review foreclosure actions from 2009 and 2010 to determine whether borrowers had been unlawfully foreclosed on or suffered some other financial harm due to errors in the foreclosure process.
The agreement  resolves matters left unsettled by a $25 billion deal that the top five servicers reached last February with the Justice Department, housing authorities and state attorneys general to end an investigation into foreclosure practices including robo-signing.
Those authorities had taken a broad approach to dealing with allegations of robo-signed documents and faulty foreclosures, while the bank regulators had initially opted for the more targeted, individual reviews.
Bank of America said it supports the new approach “because it expands the number of borrowers who will receive payment, speeds the delivery of those payments, and will provide support for homeowners still struggling to make payments.”


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