JPMorgan Chase & Co.
) is the latest bank to be probed for its alleged involvement in
money laundering transactions pertaining to drug cartels,
especially in Venezuela and several other economically restricted
nations. The Office of the Comptroller of the Currency (OCC) - a
self-regulating wing of the U.S. Treasury Department - is
conducting the investigation.
The current investigation is an outcome of heightened vigilance by
the regulatory authorities to crackdown on the doubtful financial
activities of the banks, ensuring effective compliance of the U.S.
government's anti-laundering laws.
Last month, JPMorgan had hinted in its quarterly filing with the
U.S. Securities and Exchange Commission that the regulators have
stepped up their scrutiny. Another financial giant -
Bank of America Corporation
) - is also under the regulatory lens.
At present, the whole scenario, regarding the scope of inquiry and
the probable penalties, seems to be vague as the probe is in the
initial phase. Further, the Department of Justice (DoJ) is focusing
on JPMorgan simply to put the Bank Secrecy Act - a law that
requires financial institutions and their employees to take steps
to prevent money laundering - into effect.
Other Banks Probed for Money Laundering
In August 2012,
Standard Chartered PLC
) reached a $340 million settlement with the New York State
Department of Financial Services (DFS) pertaining to money
laundering in Iran. The agreement came almost a fortnight after the
New York's top regulating authority accused the London-based bank
of concealing transactions worth $250 billion (£160 billion)
relating to Iran. According to the DFS, these transactions, which
took place in the last decade, were in contempt of the U.S. laws
Earlier in July 2012, the top executives at
HSBC Holdings plc
) faced a tough inquiry by the congressional committee for their
alleged involvement in money laundering during the period
2004-2010. The investigation revealed substantial lapses in the
bank's anti-money laundering compliance.
This resulted in a worldwide displacement of funds from riskier
nations through the bank. Controversial transactions
pertaining to its Iranian clientele and the illegal narcotics trade
in Mexico drew maximum attention. Consequently, the bank was
penalized $700 million for its sloppy anti-compliance measures.
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In April 2012, OCC accused
) of failing to comply with anti-laundering compliance. Further, it
alleged that the bank failed to conduct due diligence on its
overseas clientele, had derisory controls and was unable to
properly screen its client relationships throughout the bank. The
regulator did not penalize Citi, though it said it reserved the
right to do so.
JPMorgan surely seems to have hit a rough patch somewhere. Earlier
this year, all spotlights were on the company for its trading
debacle and now the laundering probe is grabbing attention.
Additionally, JPMorgan needs to deal with a plenty of other
lawsuits. However, the ill effects of all these are likely to be
eliminated by the strong fundamentals of the company.
The shares of JPMorgan currently retain a Zacks #3 Rank, which
translates into a short-term Hold rating. Considering the
fundamentals, we also maintain a long-term Neutral recommendation
on the stock.