JPMorgan Chase Bypassing Bank Secrecy Act Regulations?

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The following contains some damning allegations regarding JPMorgan Chase from the HSBC whistle-blower Everett A. Stern, CEO, Tactical Rabbit, Inc. ValueWalk reached out to JPMorgan for comment, but at the time of this publication they have not responded to comment.

See the full note in PDF format at the bottom of this post.



Subject: JPMorgan Chase & Co. (NYSE:JPM) Policies and Activities to Bypass Bank Secrecy Act Regulations and to Not Fully Comply with Anti-Money Laundering Regulations

DOI: August – September 2014

Source: A reliable source who has undergone some vetting and validation and has a reporting record on this subject. The source has deep experience and expertise on banking, financial and compliance issues.

JPMorgan instituting policies resolving suspicious activity reports

1. As of August and September 2014, elements of the JPMorgan Chase & Co. (NYSE:JPM) (JPMC) were instituting policies and carrying out activities with the objective of resolving Suspicious Activity Reports (SAR)’s as quickly as possible. The effects of these policies and activities was to bypass Bank Secrecy Act (BSA) regulations and to not fully comply with U.S. Department of Treasury Office of the Comptroller and Currency (OCC) Anti-Money Laundering (AML) regulations. Some of the JPMorgan Chase management personnel responsible for these policies and activities were former HSBC management personnel who had been involved in questionable compliance activities with HSBC.

2. Specifically, two former HSBC managers, and , came on-board with JPMorgan Chase in May 2014 to address and resolve approximately 30,000 – 40,000 backlogged branch referral SAR reports in the JPMorgan Chase & Co. (NYSE:JPM) system. At the Columbus, Ohio office of JPMorgan Chase, more than 100 consultants from the Robert Half temporary staffing company were brought in to work on the backlogged SAR’s. Almost all of these temporary consultants had little or no AML experience, and they were given a substandard two week training course to try and bring them up to industry standards. The new temporary hire consultants were pushed by and to resolve 5 to 6 SAR cases per day each – with SAR managers reviewing and approving up to 30 SAR cases per day (Source Comment: Due to the pressure to resolve SAR’s and push them out of the system, the quality of SAR reporting and case documentation was poor and would not meet the standards of the OCC).

JPMorgan’s hiring practices

3. and instituted policies to close several JPMorgan Chase & Co. (NYSE:JPM) compliance offices around the country that were staffed with experienced compliance personnel knowledgeable in BSA and SAR regulations. In their place, the two managers were “building out” two new JPMorgan Chase offices in Brooklyn, New York and Delaware and staffing them with personnel who did not have adequate compliance or AML backgrounds or experience. (Source Comment: It was all about the numbers at JPMorgan Chase and getting SAR’s resolved as soon as possible, with little or no due diligence done to ascertain if there is nefarious activity occurring. Quality SAR and compliance procedures were no longer the priority – the emphasis was on closing SAR cases and getting them out of the system).

4. and de-emphasized conducting extensive due diligence on SAR’s to identify criminal or terrorist links, and instead, pushed for JPMorgan Chase & Co. (NYSE:JPM) investigators and compliance officers to only use a basic open source Internet search (Google’s “Dirt String”) to uncover any negative media stories related to a suspicious client or customer that was subject of a SAR (Source Comment: When thorough open source searches and investigations were used at JPMorgan Chase, many criminal elements were detected and their accounts shut down. However, the new push was to only use the one basic Google search tool and then resolve the case. When JPMorgan Chase investigators and compliance officers have concerns about this issue – they were ignored).

JPMorgan not fulfilling their BSA obligation

5. Normally banks are asked by the OCC to review an account after 90 to 120 days after an initial SAR has been filed on the account. Banks are supposed to review these accounts and file a continuing activity report (CAR) on any further suspicious activity on the account. However, and initiated a new policy that if the suspicious account had no further alerts, and there was no interest on the behalf of U.S. law enforcement elements, then the case was automatically closed by a computer program with no further review (Source Comment: Plenty of suspicious activities continued to occur in accounts that were the subject of initial SAR’s, but were then closed by this automatic computer program. This means that per the new policy, JPMorgan Chase & Co. (NYSE:JPM) was not fulfilling their BSA obligation to report all suspicious activity. A human review should have been made be of all accounts that were subject of initial SAR’s, and this did not happen due to the new policy).

6. In August 2014, one of the new managers brought in to the newly created JPMorgan Chase compliance office in Delaware advised his JPMorgan Chase & Co. (NYSE:JPM) compliance team that it was unnecessary to file a SAR on the first identified instance of structuring. In lieu of the issuance of a SAR, the manager stated that a warning letter from JPMorgan Chase  should be sent to the client/customer who carried out the suspicious structuring activity. (Source Comment: Structuring to avoid filing a currency transaction report (CTR) is a primary violation of the BSA. It is against U.S. Federal law and is always suspicious because it does violate Federal law. By identifying the activity as structuring, but not filing a SAR, JPMC was violating the BSA, which obligates JPMorgan Chase to file on suspicious activity identified by JPMC).

7. (Source Comment: A major concern was that JPMorgan Chase & Co. (NYSE:JPM) was violating OCC and BSA regulations due to the policies instituted by and and the lack of understanding on what JPMorgan Chase’s obligation to the BSA was. Many JPMorgan Chase managers have little to no understanding of the BSA, and and have continued to bring in new consultants and personnel to work on JPMorgan Chase compliance and SAR issues who are brand-new to the industry, or have little experience and background in these issues. Procedures have continued to be approved that shorten the time required to do an investigation of SAR’s and thereby have maximized the number of SAR cases that can be closed. This has increased production, but at the expense of doing what the BSA actually obligates JPMorgan Chase to do – which is thoroughly, accurately and honestly report suspicious activity).

Full note here J.P.-Morgan-Chase_Redacted

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