The following article is brought to you by Carrick Mollenkamp and Brett Wolf at ChicagoTribune.Com.
(Reuters) – A U.S. regulatory probe of JPMorgan Chase & Co’s anti-money laundering systems is focusing on potential lapses in how the largest U.S. bank monitors suspect money transactions, according to people familiar with the situation.
The probe appears to be focused on the systems and personnel that JPMorgan uses to safeguard against illicit money flows, the sources said, declining to be identified because they were not authorized to speak to the media.
One specific angle of the probe is how the bank’s systems were set up to review a high volume of suspect transactions.
Banks are required to file reports of suspicious activity but that can add to costs. Regulators and banks sometimes disagree over whether those reviews produce reports that actually identify financing tied to illegal narcotics, terrorism or sanctioned countries.
JPMorgan faces being hit with a regulatory order by the U.S. Office of the Comptroller of the Currency, which regulates national banks. That order would identify lapses and require the bank to tighten the anti-money laundering systems it uses.
The OCC and the bank declined to discuss the details of the probe.
The probe adds to problems facing CEO Jamie Dimon, whose reputation for running one of the safest U.S. banks was dealt a blow earlier this year when it suffered a $5.8 billion trading loss. A U.S. Senate committee has launched a probe into the “London Whale” trading losses.
The OCC probe – and potentially inquiries by other regulators such as the U.S. Justice Department – could still widen and identify specific transactions that allowed illicit funds to move through the bank.
A lead OCC examiner in charge of overseeing JPMorgan has a reputation for a hard-nosed approach to uncovering money laundering at major banks, according to other people familiar with the situation.
The OCC probe comes at a time when U.S. authorities have launched a broad crackdown on money laundering. This year, a U.S. Senate probe of British bank HSBC Holdings Plc and a New York investigation into Standard Chartered Plc, also of the U.K., identified transactions tied to drug cartels in Mexico and sanctioned countries such as Iran.
HSBC set aside $700 million to cover potential settlement or fines, while Standard Chartered reached a $340 million settlement with the New York banking regulator.
In August of last year, a U.S. Treasury department that oversees violations against U.S. sanctions fined JPMorgan $88.3 million for what it called “egregious” violations of U.S. economic sanctions programs.
The OCC, which is now investigating the bank, is a separate unit within the Treasury Department.
The OCC has also come under increasing pressure to ferret out problems inside the banks it regulates. As part of the Senate probe of HSBC, the Senate panel said the OCC allowed compliance problems to “fester” at HSBC and that it failed to take action to correct the problems.