More On Legal & Compliancefrom The Advisor's Professional Library
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
JPMorgan Chase must pay $1.7 billion to victims of the Bernie Madoff Ponzi scheme as part of a settlement reached Monday with U.S. federal prosecutors.
Under the settlement agreement, JPMorgan admitted that it violated the Bank Secrecy Act and that the bank’s anti-money laundering policies were inadequate to detect Madoff’s massive scheme, which ended up costing investors nearly $20 billion and which was conducted mainly through JPMorgan Chase accounts.
Separately, the Financial Crimes Enforcement Network bureau of the Treasury fined JPMorgan $461 million for violating the Bank Secrecy Act.
“We recognize we could have done a better job pulling together various pieces of information and concerns about Madoff from different parts of the bank over time,” JPMorgan said in a statement. “We filed a Suspicious Activity Report (SAR) in the U.K. in late October 2008, but not in the U.S.”
The settlement agreement includes a deferred prosecution agreement with Manhattan U.S. Attorney Preet Bharara, which states that criminal charges against the bank for BSA violations will be delayed for two years pending the payments to victims and reforms of JPMorgan’s AML policies.
Federal prosecutors state in the settlement documents that from about October 1986 until Madoff was arrested in December 2008, the scheme was conducted “almost exclusively through a demand deposit account and linked cash and brokerage accounts” held at JPMorgan Chase.
During that time, the document goes on to say, “virtually all client investments were deposited into the primary Madoff Securities account” at JPMorgan Chase, and that “virtually all ‘redemptions’ were paid from a linked disbursement account, also held by Madoff Securities” at JPMorgan Chase.
In its statement, JPMorgan Chase said that the firm was making “significant efforts to strengthen” its Bank Secrecy, AML and Know Your Customer practices “across the board to be best-in-class.”
JPMorgan went on to say that “We do not believe that any JPMorgan Chase employee knowingly assisted Madoff’s Ponzi scheme,” and that Madoff's "widespread fraud ... deceived thousands, including us."
Check out 12 Worst Financial Advisors in America: 2013 on ThinkAdvisor.