Banking Law

Turning a blind eye to Madoff fraud spurs $1.7B penalty for JPMorgan


JPMorgan Chase has agreed to pay $1.7 billion to settle criminal charges that it ignored signs of fraud by its client Bernard Madoff.

The money will go to victims of Madoff’s Ponzi scheme, report the New York Times DealBook blog and the Wall Street Journal (sub. req.). An agreement expected to be announced later today by federal regulators in a civil case is expected to bring the total to be paid by the bank for its Madoff dealings to about $2 billion, DealBook says.

“Before Bernard L. Madoff stole billions of dollars from his clients,” DealBook says, “and before he received a 150-year prison sentence for those crimes, JPMorgan Chase had a chance to warn federal authorities about his Ponzi scheme but never did.”

The fine is the largest ever Justice Department penalty for violation of the Bank Secrecy Act, which requires reporting of suspicious transactions, the Wall Street Journal says. The deal is part of a deferred prosecution agreement (PDF).

The deal follows a record settlement in November in which JPMorgan Chase agreed to pay $13 billion for misleading investors in its packaging of mortgage securities.

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