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July 15, 2022 at 09:56 AM
What You Need to Know
- Regulators have zoomed in on Bank of America, Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley over record-keeping lapses.
- The sweeping civil probes rank among the largest-ever penalties tied to these infractions, dwarfing a $15 million penalty imposed on Morgan Stanley in 2006.
Regulators are poised to extract about $1 billion in fines from the five biggest U.S. investment banks for failing to monitor employees using unauthorized messaging apps.
Morgan Stanley disclosed on Thursday that it expects to pay a $200 million fine, the same amount JPMorgan Chase & Co. paid as authorities use that settlement as a yardstick for the industry.
Citigroup Inc. has a reserve in line with what other banks have disclosed, the firm’s finance chief said Friday.
Goldman Sachs Group Inc. and Bank of America Corp. also have had advanced discussions with the regulators to each pay a similar figure, according to people with knowledge of the talks who asked not to be identified because the matter isn’t public.
The discussions have not yet concluded and the penalties could still change.
The grand total represents a rare escalation from regulators looking into such an issue, with fines tending to be significantly lower in the past.
The sweeping civil probes rank among the largest-ever penalties levied against U.S. banks for record-keeping lapses, dwarfing a $15 million penalty imposed on Morgan Stanley in 2006 over its failure to preserve emails.
Finance firms are required to scrupulously monitor communications involving their business to head off improper conduct. That system, already challenged by the proliferation of mobile-messaging apps, was strained further as firms sent workers home shortly after the start of the Covid-19 outbreak.
In December, the Securities and Exchange Commission and the Commodity Futures Trading Commission imposed $200 million in fines on JPMorgan, saying that even managing directors and other senior supervisors at the bank had skirted regulatory scrutiny by using services such as WhatsApp or personal email addresses for work-related communication.
‘Appropriate’ Reserve
New York-based Citigroup took a one-time reserve for the probe, Chief Financial Officer Mark Mason said on an earnings conference call with reporters Friday. The reserve is “appropriate” and “aligned with what our peers have disclosed,” he said.
