A top banking regulator told U.S. prosecutors that a criminal case against JPMorgan Chase & Co (NYSE:JPM) could trigger a review of its banking charter.
Dan Fitzpatrick and Scott Patterson of The Wall Street Journal report that the OCC in its response to the U.S. Attorney’s office highlighted potential consequences of a criminal investigation into whether JP Morgan provided adequate warnings about Bernard Madoff.
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JPMorgan in deferred prosecution agreement
Bernard Madoff, one of the most notorious financial criminals in living memory, orchestrated a Ponzi scheme in which investors lost over $17 billion. JPMorgan Chase & Co (NYSE:JPM) was the banker of Bernard Madoff for about two decades.
JPMorgan Chase & Co (NYSE:JPM)’s national banking unit has reportedly violated the Bank Secrecy Act, which mandates that banks report any suspicious activity to the government.
Earlier this year, Madoff disclosed that large banks like JPMorgan knew that his brokerage firm was a Ponzi scheme. He also provided evidences that banks knew about his Ponzi schemes very well.
Looking at the magnitude of the criminal investigation, the bank and prosecutors are in talks about a deferred prosecution agreement. This agreement will allow JPMorgan Chase & Co (NYSE:JPM) to pay a fine, and a few other concessions, to avoid facing criminal charges. Federal authorities may also ask the bank to hire an independent monitor.
OCC to decide revoking bank’s charter
The Office of the Comptroller of the Currency recently stated that it is required to hold a hearing about whether to revoke a bank’s charter in the event of a criminal money-laundering conviction. The review is optional if a bank violates a law requiring it to report any suspicious activity or cash transactions. Dan Fitzpatrick and Scott Patterson of The Wall Street Journal are not sure which of the scenarios might be applied to JPMorgan Chase & Co (NYSE:JPM) if prosecutors were to bring a case.
JPMorgan faces plethora of cases
Recently, JPMorgan Chase & Co (NYSE:JPM) reached a tentative agreement to pay a record $13 billion fine to the Justice Department to settle probes into its residential mortgage-backed securities. If the amount is confirmed, it would be the largest ever paid by a U.S. company in this type of settlement with the government, well over half the bank’s earnings last year of $21.3 billion.
In related news, an investor group consisting of asset managers BlackRock, Inc. (NYSE:BLK) and Neuberger Nerman Group LLC were reportedly in settlement talks with JPMorgan Chase & Co (NYSE:JPM) for a $5.75 million claim.