As per a report in The Wall Street Journal,JPMorgan Chase & Co. ( JPM ) in a bid to strengthen its anti money-laundering controls is scrutinizing its U.S correspondent banking business. As a part of the review initiated in Jan 2014, the banking behemoth has stopped the mentioned business expansion for the time being.
Moreover, following the completion of review, JPMorgan might discontinue its business relation with some of its existing clients.
JPMorgan derives a relatively large portion of its revenue flow from non-traditional banking activities which include correspondent banking activities. The bank offers its services to various financial organizations, thereby clearing and processing transactions on their behalf.
Some of the major clients currently undergoing the aforementioned review include Banamex USA, a unit of Citigroup Inc. ( C ), Zions Bancorp. ( ZION ) and Regions Financial Corp. ( RF ). Moreover, the Citigroup unit is undergoing investigations associated with certain ambiguous banking activities along U.S.-Mexico border.
Though domestic correspondent banking business is comparatively less risky than its foreign counterpart, it does bring forth certain degrees of uncertainty associated with know your customer issues as well as ample scopes of money laundering. Earlier in 2013, JPMorgan had initiated an internal review of its foreign correspondent banking business.
JPMorgan has been under the regulatory scanner for quite sometime now. The company has paid hefty fines and faced long drawn litigations that weighed heavily on its profitability.
Presently, having settled most of the major legal issues in 2013, JPMorgan intends to focus primarily on its core business. Therefore, the company is taking measured steps, carefully abiding by regulations and steering clear off business/units that may entail litigation or regulatory scrutiny in the future.
JPMorgan currently carries a Zacks Rank #4 (Sell).