Bernie Madoff is one of the most infamous white-collar criminals in modern history. Formerly a non-executive chairman of the NASDAQ exchange, Madoff is currently serving a 150-year sentence for operating the largest Ponzi scheme in history. In 2009, he pleaded guilty to 11 accounts felony financial fraud. All told, the amount missing from client accounts, including fabricated gains, was nearly $65 billion, with actual losses to investors of about $18 billion.
Madoff has been behind bars for nearly four years now, and the magnitude of his fraud is still making waves. A person familiar with the matter tells Reuters that the Office of the Comptroller of the Currency is expected to issue a cease-and-desist order against JPMorgan (NYSE:JPM), which served as Madoff’s main bank for 20 years.
To be clear, JPMorgan hasn’t been accused of any intentional wrongdoing. The OCC’s gripe with the bank is a result of the fact that it failed to perform due diligence on Madoff and detect or report suspicious activity. The cease-and-desist order would require the bank to patch the holes in its anti-money laundering unit, and tighten its risk controls.
The source told Reuters that the OCC is not currently looking to impose any financial penalties on JPMorgan. The relationship between the bank and regulators has grown tense in the wake of the London Whale incident, and officials seem keen to pick and choose their battles. If JPMorgan fails to comply with the cease-and-desist in a satisfactory way, then regulators may choose to increase the pressure. Such a move would be in line with a recent crackdown on anti-money laundering practices at big banks that officials do not think are up to par.
In December, HSBC (NYSE:HBC) was fined a record $1.9 billion. The civil and criminal penalty was the result of the bank’s failure to detect drug trafficking funds that were flowing from Mexico into the United States through the bank.
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