JPMorgan told to fix oversight tied to $6B loss
WASHINGTON (AP) - JPMorgan Chase & Co. has been ordered to take steps to correct poor risk management that led to a surprise trading loss last year of more than $6 billion.
Federal regulators also on Monday cited the bank for lapses in oversight that could allow the bank to be used for money laundering.
JPMorgan, the nation's largest bank by assets, will not pay a fine under the agreements with the Federal Reserve and the U.S. Comptroller of the Currency, a Treasury Department agency. The bank promised to strengthen its policies and procedures to control risk and to screen customers to prevent money laundering.
The regulators each issued two cease-and-desist orders against JPMorgan, a sanction that requires a bank to change its practices. They said they had found "deficiencies" in the bank's procedures for preventing money laundering, and also uncovered "unsafe or unsound practices" regarding management of risk. The orders said the regulators and other government agencies could pursue further action.
Britain's Financial Services Authority, meanwhile, said in a statement Monday that its own investigation into JPMorgan's trading loss continues.
The U.S. regulators said that the bank has committed to take "all necessary and appropriate steps" to correct the problems.
JPMorgan neither admitted nor denied the regulators' findings in agreeing to the accords.
"We've been working hard to fully remediate the issues" related to risk management, JPMorgan spokesman Mark Kornblau said. He added that the bank has also made preventing money laundering a "top priority."
In May, JPMorgan disclosed that its London office lost billions in trades designed to hedge against risk. The bank later said that some traders had tried to hide the size of the losses.
The loss, which occurred less than four years after the 2008 financial crisis, hurt the bank's reputation. JPMorgan had survived the crisis by taking fewer risks than its competitors.
In June, JPMorgan CEO Jamie Dimon acknowledged before congressional lawmakers that the bank made mistakes but he defended its strategy for managing risk.
Still, the bank took action against several employees at the heart of the controversy. Two senior managers and a trader linked to the London trading operation were fired. The bank took back nearly two years' compensation from them.
In addition to the firings, Ina Drew, the bank's chief investment officer overseeing its trading strategy, retired after 30 years at the bank and voluntarily repaid two years' salary.
The bank also made a broad reshuffle of its top management, in an apparent bid to restore investors' trust.
The second action announced Monday against JPMorgan was related to money laundering controls. The accord did not cite any specific case, but the agreement reached was similar to one Citibank struck with regulators in April.
The bank was cited for poorly monitoring potential money laundering at a time when a number of banks have been the spotlight for such abuse.
HSBC agreed last month to pay $1.9 billion- the largest penalty ever imposed on a bank- for lapses the Justice Department said enabled Mexican drug traffickers, Iran, Libya and others under U.S. sanction to move money around the world. And Standard Chartered Bank is paying $327 million to settle U.S. and New York City charges that it laundered money on behalf of four countries subject to U.S. sanctions: Iran, Sudan, Libya and Burma.
Money laundering takes profits from the trafficking of drugs or arms or other illicit activities and passes them through bank accounts or other legitimate businesses to disguise the illegal activity.
AP Business Writer Christina Rexrode in New York and Associated Press writer Raphael Satter in London contributed to this report.
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