More On Legal & Compliancefrom The Advisor's Professional Library
- Registration Requirements for Investment Advisor Representatives (IARs) When individuals launch an advisory firm, they must avoid marketing themselves or the firm as investment advisors before they are properly approved and registered. Otherwise, they are subject to severe penalties.
- Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.” The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.
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.