JPMorgan Chase & Co. (NYSE:JPM) (Analyst Report) is set to shut down the accounts of the current and former foreign government officials. This would impact nearly 3,500 accounts held with the bank. The news was first reported by the Financial Times on Tuesday.
Apart from closing the Chase accounts of these foreign officials, JPMorgan Chase & Co. (NYSE:JPM) will stop the credit card facilities for them as well. However, the accounts held with the company’s private bank (which primarily deals with a wealthier client base) were exempted from the aforementioned streamlining.
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The latest move on the company’s front comes as a part of its anti money-laundering controls. Moreover, the rigorous scrutiny procedure associated with the accounts of the foreign government officials entails huge compliance cost. Therefore, the closure of these accounts will enable JPMorgan Chase & Co. (NYSE:JPM) to control the surge in the same.
Nevertheless, the recent development has been subject to criticism from non-U.S. officials on grounds of discrimination. Further, José Antonio Ocampo, the former finance minister of Colombia has already submitted a written complaint against it to the US Consumer Financial Protection Bureau.
Some of the other banks that cater foreign government officials in the U.S. include Citigroup Inc (NYSE:C) (Analyst Report) and HSBC Holdings plc (ADR) (NYSE:HSBC) (Analyst Report). These companies might follow the suit and close the accounts of foreign officials as the overall economy remains sluggish with continued rise in overall expenses.
Further, we see no distinctive improvement in the equity market. This was also affirmed by JPMorgan in its latest quarterly filing where it projected a 20% year over year decline in market revenue for second quarter 2014. Amid the given scenario wherein there are limited scopes to improve the top line, companies like JPMorgan are resorting to aggressive cost cutting measures in an attempt to enhance profits.
Moreover, having cleared most of its major legal hassles in the 2013, the company now quite understandably wants to steer clear of businesses that entail litigations and may increase legal expenses going forward.