Federal and state authorities are investigating a handful of major US banks for failing to monitor cash transactions in and out of their branches, a lapse that may have enabled drug dealers and terrorists to launder tainted money, according to officials who spoke on the condition of anonymity.
These officials say they are beginning one of the most aggressive crackdowns on money laundering in decades, intended to send a signal to the US’ biggest banks that weak compliance is unacceptable.
Regulators, led by the US’ Office of the Comptroller of the Currency, are close to taking action against JPMorgan Chase for insufficient safeguards, the officials said. The agency is also scrutinizing several other Wall Street giants, including Bank of America.
The comptroller’s office could issue a cease-and-desist order to JPMorgan in coming months, an action that would force the bank to plug any gaps in oversight, according to several people knowledgeable about the matter. However, the agency, which oversees the US’ biggest banks, has not yet completed its case.
JPMorgan is in the spotlight partly because federal authorities accused the bank last year of transferring money in violation of US sanctions against Cuba and Iran.
Last year, JPMorgan agreed to pay US$88.3 million to the US Treasury Department, which had accused the bank of thwarting US sanctions by processing roughly US$178.5 million for Cubans in 2005 and 2006. Even after bank officials spotted the questionable transactions in 2005, they failed to report the problem to federal authorities, the Treasury said.
JPMorgan also made an improper US$2.9 million loan in 2009 to a bank tied to Iran’s government-owned shipping line, according to the Treasury Department.
In a statement last year, Treasury officials called the bank’s actions “egregious,” adding that JPMorgan’s “managers and supervisors acted with knowledge of the conduct constituting the apparent violations and recklessly failed to exercise a minimal degree of caution or care.”
At the time, JPMorgan said that it had not dealt directly with institutions in Cuba and Iran and that it had merely acted as a middleman.
In addition to the comptroller, prosecutors from the US Department of Justice and the Manhattan district attorney’s office are investigating several US financial institutions, according to several law enforcement officials.
The surge in investigations, compliance experts say, is coming now because authorities were previously inundated with problems stemming from the 2008 financial turmoil.
“These issues may have been put on hold during the financial crisis, and now regulators can go back to focus on money-laundering and other compliance problems,” said Alma Angotti, a director at Navigant, a consulting firm that advises banks on complying with anti-money laundering rules.
Until now, investigators have primarily focused on financial transactions at European banks, most recently Standard Chartered. The authorities accused several foreign banks of flouting US law by transferring billions of US dollars on behalf of sanctioned nations.
As the investigation shifts to US shores, the Justice Department and the Manhattan district attorney’s office are moving beyond those violations to focus on money-laundering, in which criminals around the globe try to hide illicit funds in US bank accounts. If these new cases follow the pattern of previous ones, prosecutors could follow up on regulatory actions with their own complaints.
Under the US’ Bank Secrecy Act, financial institutions like banks and check-cashers must report any cash transaction of more than US$10,000 and bring any dubious activity to the attention of regulators. The federal law also requires banks to have complex controls in place to detect any criminal activity.
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