OCC Circles Back to JP Morgan’s Money Laundering

When I first read that the government was going to investigate JP Morgan Chase ∂for money laundering, I thought this was another case where the government continued to give wrist slaps–in the form of softball fines–to banks for behavior that never really changed. And to some degree that will be the case. After all, little more than a year ago Treasury’s Office of Foreign Assets Control accused Jamie Dimon’s company of a whole slew of things, including sending Iran a ton (literally) of gold bullion. And in spite of the fact OFAC said JPMC substantially cooperated with their investigation so they could give it a softball fine, the settlement actually made it clear they had done anything but. (Though the softball fine may have also had something to do with what I suspect was cooperation on setting up the Scary Iran Plot.)

So here we are again, investigating JPMC for money laundering. Again.

But I wonder whether this doesn’t reflect an effort on the part of the Office of Comptroller and Currency, which the NYT says is leading the probe, to improve on its past willful neglect in this area.

Regulators, led by the Office of the Comptroller of the Currency, are close to taking action against JPMorgan Chase for insufficient safeguards, the officials said. The agency is also scrutinizing several other Wall Street giants, including Bank of America.

The comptroller’s office could issue a cease-and-desist order to JPMorgan in coming months, an action that would force the bank to plug any gaps in oversight, according to several people knowledgeable about the matter. But the agency, which oversees the nation’s biggest banks, has not yet completed its case. JPMorgan is in the spotlight partly because federal authorities accused the bank last year of transferring money in violation of United States sanctions against Cuba and Iran.

Since OFAC let JPMC off with a wrist slap last year, the OCC has gotten a new confirmed head, Thomas Curry, from FDIC, and gotten rid of a corrupt Chief Counsel, Julie Williams. OCC also got hammered in Carl Levin’s report on HSBC’s money laundering.

To carry out [its oversight] mission, in the words of the OCC, it conducts “regular examinations to ensure that institutions under our supervision operate safely and soundly and in compliance with laws and regulations,” including AML laws. However, the HSBC case history, like the Riggs Bank case history examined by this Subcommittee eight years ago, provides evidence that the current OCC examination system has tolerated severe AML deficiencies for years and given banks great leeway to address targeted AML problems without ensuring the effectiveness of their AML program as a whole. As a result, the current OCC examination process has allowed AML issues to accumulate into a massive problem before an OCC enforcement action is taken.

When Curry and a few others from OCC testified in the hearing on HSBC’s money laundering in July, they promised to improve their Anti-Money Laundering oversight.

We have already identified a new approach that we will implement to assure that BSA/AML deficiencies are fully considered in a safety and soundness context and are taken into account as part of the “Management” component of a bank’s CAMELS [Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk] rating. We are revising and clarifying the operation of our cross-functional Large Bank BSA Review Team (LB Review Team) to enhance our ability to bring different perspectives to bear and react on a more timely basis to circumstances where a bank has multiple instances of Matters Requiring Attention, or apparent violations of the required components of its BSA/AML program. We will also explore how we track and review relevant information in this regard and whether new initiatives are appropriate in that area as well. We will also revisit our current approach to citing BSA/AML violations in order to provide more flexibility for individual “pillar” violations to be cited, and we will identify what steps we can take in our examinations to more promptly obtain a holistic view of a bank’s BSA/AML compliance. Finally, we will review other areas, such as training, staffing, recruitment, policies, and interagency coordination, to make improvements in our BSA/AML supervision program.

NYT reports that this increased scrutiny is, in part, a response to the lessons OCC learned in reviewing its failures in the HSBC case.

The case against HSBC alarmed banking regulators, who wondered if monitoring flaws could be pervasive in the banking industry. The comptroller’s office, which lawmakers accused of missing warning signs about HSBC’s weaknesses, has stepped up its scrutiny of American banks in recent months.

So it makes sense that OCC would go back and investigate how JPMC was committing so many sanctions violations and what other money laundering it might be engaged in. It makes sense that OCC would go back and clean up the mess left by the incompetent OCC incompetent leadership of the last decade. The NYT even quotes a compliance person admitting OCC has done nothing in this area for years, though uses as an excuse OCC being “inundated with problem stemming” from the financial crash.

The surge in investigations, compliance experts say, is coming now because authorities were previously inundated with problems stemming from the 2008 financial turmoil. “These issues may have been put on hold during the financial crisis, and now regulators can go back to focus on money-laundering and other compliance problems,” said Alma M. Angotti, a director at Navigant, a consulting firm that advises banks on complying with anti-money-laundering rules.

Given that OCC has done pretty much nothing since the crash to fix things, it’s unclear how that could have been the distraction.

In any case, even in a best case scenario, this new effort will be about stopping JPMC’s facilitation of money laundering going forward, not punishing it for being utterly negligent in the past. NYT reports JPMC will get a Cease and Desist order, not the whopping fine they deserve to get. And OCC admits that C&Ds are simply remedial documents; they’re not punishment.

When deficiencies in the BSA/AML area rise to the level of a BSA compliance program violation (12 C.F.R. § 21.21), or when a bank fails to correct problems with the program that had been previously reported to the bank (including through MRAs), a statutory mandate (12 U.S.C. 1818(s)) requires the banking agency to use its cease and desist (C&D) authority to correct the problem. Section 1818(s) specifically provides that if an insured depository institution has failed to establish and maintain a BSA compliance program or has failed to correct any problem with the BSA compliance program previously reported to the institution by the appropriate Federal banking agency, the agency shall issue a C&D order against the institution.


The C&D order is a remedial document that is designed to obtain correction of violations of law and unsafe or unsound practices at the Bank. The issuance of the order does not preclude the OCC from assessing a civil money penalty at a later time. The OCC is now actively engaged in evaluating the Bank’s compliance with the C&D order and in considering the assessment of CMPs.

After having been embarrassed in the HSBC probe, OCC is at least making noise about stopping the facilitation of money laundering by US banks. That might lead us to discover how much money laundering they’ve been facilitating. But it will be years–if ever–before they ever pay a price for being an accessory to all this crime.

18 replies
  1. thatvisionthing says:

    Someone on Naked Capitalism I think (or maybe it was here) called the OCC the Office of Criminal Complicity.

    Even if new people at the OCC were trying to do an honest job, I can’t help but think of the beat cops on The Wire. I only saw a couple seasons, but the way it went was this: Thirteen episodes a season. The first twelve you get to see the chase from both sides, Baltimore PD and the crime they’re chasing, meet all the characters, understand where they’re coming from, see the game played. Feel me? Yes. And in the thirteenth both sides lose because there’s a game outside the game, and the game you’ve been watching is rigged from beyond.

    The fish rots from the head.

  2. bigchin says:

    Seems to me that a very simple truth has established itself, the consequences of which are unalterable: the bad guys won.

    They won everything, by way of regulatory capture, even if they’ve yet to accomplish their goal of literally “owning” everything.

    The kabuki of a Carl Levin and all those inside the beltway who pretend to be concerned aside, I see no reason for hope. There will be no justice for anyone deserving it and no justice against the criminal monied class, which can best be described as the Democratic and Republican parties. That most Americans willfully strap themselves, like suicide bombers, to this bi-partisan apparatus of deception and destruction is vivid and damning proof of the nation’s collective, indeed nurtured, insanity.

    If you are a young person with a dream, you’ll need to look for a different country in which to realize it. Where that might be, I couldn’t tell you…


  3. joanneleon says:

    I guess the obvious question is why, after the 2008 crash, we did not see a huge increase in staffing in the regulatory agencies, the FBI, the IRS, and other agencies to deal with it. Now maybe they did increase their staff, to some extent, but there certainly wasn’t a proportional increase.

    I can understand why it didn’t happen under Bush because nobody on the Left expected that from that administration. But it should have happened because despite the propaganda in the media, it was no surprise that there was going to be a crash, particularly after the Bear Stearns mess. These execs knew they were pumping out MBS like crazy and they knew it was all going to come crashing down but kept sucking the cash out of it for as long as they possibly could.

    But when the Dems took control of the White House, the House and the Senate, they could have allocated the necessary money to staff up all the necessary agencies, big time. And they didn’t. They chose instead to do things like escalate the war in Afghanistan and hugely increase the number of contractors over there. Imagine what could have been accomplished if we had spent some of the money spent on war contractors in a different way — if we had used it to clean up Wall Street.

    I missed your post, Marcy, about JPM and the gold and the possibility that they were cooperating with the “Scary Iran Plot”. I am thoroughly confused now, or rather, have to do a lot of reading to try to understand what that was all about and how it involved banks. Is there a way to boil that down into a couple of sentences that would help me get the gist of it? If not, no problem.

    I read an article yesterday that is perhaps relevant here and it also made me wonder how we will ever find out way out of this mess. It could start by breaking up the banks, but is there any chance that this administration will do that? I would like to think that this new investigation has promise and that they have some less corrupt people in OCC now, but I simply don’t have any faith in that and I think things are so incredibly complex that by the time anyone unravels things enough, the statues of limitation will have passed for any given thing. We’d be lucky if they could grab onto one thing and go after that but will never hold people accountable for even a significant percentage of the fraud. Of course laws can be changed and though they are not supposed to be retroactive wrongdoing, look what we did for the telecoms. Anyway:

    A Warning on Bank Complexity, From Someone Who Would Know

    On Thursday, one former Wall Street executive put the issue in vivid terms as she raised concerns about the complexity of financial behemoths.

    “It makes you weep blood out of your eyes,” said Sallie L. Krawcheck, who ran Bank of America’s wealth management division before a management reshuffling last year.

    [ … ]

    On Thursday, Ms. Krawcheck did not endorse any one strategy to resolve banks’ complexity, but she said the proposal to break up banks and the regulation known as the Volcker Rule were two possible “means to an end.” Altering executive compensation, she said, might also help.

  4. emptywheel says:

    @bigchin: FWIW, I’m quite certain Levin doesn’t believe he’s engaging in kabuki. For a long time he has successfully used legislation to fix things. But he hasn’t made any progress on this, though he’s been chasing it for years.

  5. emptywheel says:

    @joanneleon: Two separate issues that I suspect are one.

    1) In August of last year, OFAC busted JPMC for trading w/Cuba and Iran, going back abt 5 years. They’ve been busted in the past, but nevertheless they got a hand slap, even though they were trading w/Iran..

    2) Many weeks later, the Scary Iran Plot broke. The govt hid its original complaint in the case for a while. After much cajoling, it became clear they were hiding 2 things: a) a probable threat against Arbabsiar’s brother that led Arbabsiar to confess to what he did and b) the names of all the banks that were involved in the transfer from Iran to the US as purported payoff. All those banks would be sanctions violators.

    While the names of the banks are still redacted, since the American one is a 5-letter major bank in NYC, I think it highly likely it is Chase, and that DOJ/DEA learned that in the course of the Arbabsiar set up, and so had to do something about JPMC’s long term fraud for Iran.

  6. Gitcheegumee says:

    Whenever the subject of money laundering is discussed, I automatically think of Viktor Bout, Although money laundering was one of the charges filed against him-arms trafficking being the most reported,the money laundering charges were later dropped.

    Reortedly,according to testimony ,Bout offered (undercover government agents),to launder money through Venezueal,Belarus and Russia.

    (Coincidentally, JPM has quite a connection with Venezuela.)
    Here’s an interesting piece on Venezuela,gold and JPM:

    As Chavez Pulls Venezuela’s Gold From JP Morgan, Is The Great Scramble For Physical Starting?
    Submitted by Tyler Durden on 08/17/2011 16:27 -0400

    In addition to the nationalization of his gold insutry, Chavez earlier also announced that he would recover virtually all gold that Venezuela hold abroad, starting with 99 tons of gold at the Bank of England. As the WSJ reported earlier, “The Bank of England recently received a request from the Venezuelan government about transferring the 99 tons of gold Venezuela holds in the bank back to Venezuela, said a person familiar with the matter. A spokesman from the Bank of England declined to comment whether Venezuela had any gold on deposit at the bank.”
    What could well be a gamechanger is that according to an update from Bloomberg, Venezuela has gold with, you guessed it, JP Morgan, Barclays, and Bank Of Nova Scotia. As most know, JPM is one of the 5 vault banks. The fun begins if Chavez demands physical delivery of more than 10.6 tons of physical because as today’s CME update of metal depository statistics, JPM only has 338,303 ounces of registered gold in storage. Or roughly 10.6 tons. A modest deposit of this size would cause some serious white hair at JPM as the bank scrambles to find the replacement gold, which has already been pledged about 100 times across the various paper markets.

    … place this month in US District Court* in New York, indicated that accused arms trafficker Viktor Bout, though not charged in that case with money laundering …
    rijock.blogspot.com/2011/10/viktor-bout-offered-to… – Cached

    As Chavez Pulls Venezuela’s Gold From JP Morgan, Is The Great …
    In addition to the nationalization of his gold insutry, Chavez earlier also announced that he would recover virtually all gold that Venezuela hold abroad, starting …
    http://www.zerohedge.com/news/chavez-pulls-venezuelas-gold-jp... – Cached

  7. Gitcheegumee says:


    Just for the timeline ,here’s a Wiki entry re: conviction and sentencing dates:

    Bout was convicted by a jury at a court in Manhattan on 2 November 2011.[1]
    On 5 April 2012, he was sentenced to 25 years in prison (the minimum sentence for conspiring to sell weapons to a U.S.-designated foreign terrorist group.)

    District Judge Shira Scheindlin ruled that the minimum sentence was appropriate because “there was no evidence that Bout would have committed the crimes for which he was convicted had it not been for the sting operation”.

  8. OrionATL says:

    softball sentences, aka, fines?

    how about this softball sentence:

    “…The case against HSBC alarmed banking regulators, who wondered if monitoring flaws could be pervasive in the banking industry…”

    they “wondered” if “flaws” could be pervasive?


    anyone who knew the banking industry at all, in particular experienced regulators, knew it was pervasive – and persistent and calculated.

  9. sd says:


    I love Iceland – but it’s got problems just like everyone else. You just don’t get to read about those problems unless you speak Icelandic.

    The party of David Odsson – who facilitated the massive crony capitalism that took hold of Iceland – is rapidly regaining in popularity and has a very god chance of retaking the prime minister’s office in the next election. To put this into context, members of the party were spotted at the recent RNC convention. They loves them so free-market bs. Icelanders are still very upset that their free lunch punchbowl was taken away and too many want to return to the days of easy money – regardless of consequences. The current Prime Minister, Johanna, has gone over the edge – she’s suggesting very high tax rates for tourists and tourism related industries – when it is tourism that has helped the country recover from their crash. She also kept trying to broker entry into the EU and pushed for adopting the Euro. The EU saved Iceland from it crony capitalists and quota king “fishermen” in the past. But adopting the Euro would have been suicidal.

    Meanwhile, 18,000 lambs just died in a freak snow storm that absolutely no one saw coming one week before they were due to be rounded up to go to market (slaughter). The farmers in the north have been devastated.

    Global warming? Weather has always been an issue up at the arctic circle but if the island becomes uninhabitable – that’s a game changer.

  10. Gitcheegumee says:

    Re: Iran and Deutsch Bank,re: money laundering(courtesy Inner City Press)-

    August 20, 2012

    In the wake of the NYSDFS action against Standard Charter, Deutsche Bank is being looked at for similar money laundering for Iran and others. In denial, Deutsche Bank spokeswoman Friederika Borgmann said the bank had decided by 2007 to stop engaging in new business with countries such as Iran, Syria, Sudan and North Korea and also exit existing businesses as far as legally possible. We’ll see.

    Meanwhile the New York State Department of Financial Services quickly filed and settled charges against Standard Chartered Bank for laundering money for Iran to evade sanctions against that country, the same NYSDFS has been remiss in its more local duties.

  11. OrionATL says:

    “…Meanwhile the New York State Department of Financial Services quickly filed and settled charges against Standard Chartered Bank for laundering money for Iran to evade sanctions against that country, the same NYSDFS has been remiss in its more local duties…”

    look, it’s one way to keep taxes low.

  12. readerOfTeaLeaves says:

    Real News Network has an interesting video interview on tax havens; good info.
    google ‘Real News Network’ + “Politics of Offshore Tax Havens”.
    Also a great critique of how little most journos know about how to even start asking about tax havens, or what they mean for economics, social stability, and/or finance. Most media is completely clueless, and then there’s FOX (which is reactionary and clueless).

    As long as the media is clueless, the inept in OCC, SEC, etc continue to get a free pass.


  13. OrionATL says:


    kinda like the hiway patrol or the local sheriff’s officers adding to the gov’t treasury by giving speeding tickets to “foreign” license plates.

  14. sd says:

    What makes you think Iceland would become uninhabitable?

    Iceland lives on the edge. If the gulf stream shifts, Iceland and much of northern Europe will be uninhabitable.

    Icelanders have long known about the shifting weather patterns having noted disruptions to migratory patterns back in the 1970’s. They just wonder why it’s taken the rest of the world so long to notice.

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