Wrist Slap for 'Too Big to Fail or Jail' JPMorgan Chase
By Tom Burghardt
January 22, 2013 "Information
-With money laundering "lapses" and CEO mea culpas all
the rage on Wall Street and the City of London, you would
think that Hope and Change™ grifter Barack Obama's Justice
and Treasury Departments would want to send a strong message
to banksters who break the law.
You'd be wrong of course.
'There's Nothing to See Here…'
While the financial press is all aflutter over news that
JPMorgan Chase (JPMC) CEO Jamie Dimon had his annual pay
package cut by 50 percent, from $23 million (£14.5m) to
$11.5 million (£7.25m) over $6.2 billion (£3.91bn) in losses
in the risky derivatives market, you'd almost believe that
Dimon was lining up for food stamps or hunting down mittens
to stave off New York's bone-chilling winter.
Despite allusions to what are euphemistically called "bad
bets" by JPMC trader Bruno Iksil, the so-called "London
Whale" on the hook for proverbial "shitty deals" that cost
Bloomberg News reported that JPMC's "fourth-quarter
profit rose 53 percent, beating analysts' estimates as
mortgage revenue more than doubled on record-low interest
rates and government incentives."
Incentives? Now there's a polite word for a megabank with
more than $2.3 trillion (£1.45tn) in assets handed some $600
billion (£378.24bn) in TARP funds, which included Federal
Reserve engineered deals for their buy-out of Bear Stearns
and Washington Mutual that wiped out shareholder equity as
the capitalist system threatened to implode in 2008.
Adding to the sleaze factor, it emerged in 2011 that JPMC
had wrongfully overcharged thousands of military families on
their mortgages, including active duty personnel serving in
Afghanistan. As a result of a class-action lawsuit, the bank
was forced to admit they had illegally overcharged 6,000
active duty military personnel, had seized the homes of 18
military families and then paid out $27 million (£17.05m) in
compensation. At a shareholder's meeting later that year
Dimon "apologized" for the "error" and lending chief David
Lowman fell on his sword as he was shown the door.
Talk about stand-up guys!
And never mind, as
Rolling Stone's Matt Taibbi pointed out, "at the
same moment that leading banks were taking trillions in
secret loans from the Fed, top officials at those firms were
buying up stock in their companies, privy to insider info
that was not available to the public at large."
drug-tainted Citigroup's former CEO Vikram Pandit
"bought nearly $7 million in Citi stock in November 2008,
just as his firm was secretly taking out $99.5 billion in
Fed loans," that other paragon of banking virtue, Jamie
Dimon, who "respects" the JPMC board's decision to slice his
pay in half "bought more than $11 million in Chase stock in
early 2009, at a time when his firm was receiving as much as
$60 billion in secret Fed loans."
Such "stock purchases by America's top bankers," Taibbi
wrote, "raise serious questions of insider trading." Yet not
a single bankster has been seriously investigated let
alone held to account, by the Justice Department.
How sweet a year was it for JPMorgan Chase? Pretty sweet by
Overall, Bloomberg reported, "revenue increased 10
percent to $23.7 billion [£14.96bn] from $21.5 billion
[£13.57bn] in the fourth quarter of 2011. Annual revenue was
$97 billion [£61.23bn], down from $97.2 billion [£61.35bn]
the prior year." This included investment banking fees which
jumped 54 percent to $1.7 billion (£1.07bn) and revenue in
the commercial banking sector which rose to $1.75 billion
(£1.1bn). And with the formation of a new housing bubble due
to taxpayer-subsidized record low interest rates, JPMC's
profits in the mortgage writing mill rose to $418 million
(£263.5m) in 2012, compared to losses which topped $263
million (£165.8m) a year earlier.
But far from being a sign that the economic black hole
opened by 2008's financial collapse has contracted, there's
bad news on the horizon for distressed homeowners and
taxpayers who will be forced to pay the piper for the next
round of predatory loans.
As analyst Mike Whitney recently pointed out in
CounterPunch a new rule defining a "qualified
mortgage" by the US Consumer Financial Protection Bureau
"creates vast new opportunities for the nation's biggest
banks to engage in predatory lending practices with
According to Whitney, while the financial press have
described the rule "as an attempt to protect borrowers from
the risky types of loans that caused the financial crisis,
the opposite is true. The real purpose of the rule is to
provide legal protection for the banks from homeowner
lawsuits, and to lay the groundwork for more reckless
lending that could inflate another housing bubble."
"In other words," Whitney noted, "the rule was designed to
serve the interests of the banks and the banks alone. This
is why bankers everywhere are celebrating the final draft."
Never mind that leading financial institutions were forced
to cough up $25 billion (£15.76bn) in a settlement with the
Office of the Comptroller of the Currency (OCC) and the
Federal Reserve over shady foreclosure practices and
wrongful homeowner evictions that ruined millions of lives.
JPMC's $2 billion (£1.26bn) portion of the settlement, which
included "a one-time pretax charge [write down] of $700
million [£441.77m] in the fourth quarter to cover the costs
associated with [the] settlement" according to Bloomberg,
was a pittance compared to the trillions of dollars in
assets controlled by the bank.
'A Trillion Here, a Trillion There…'
But as bad as these gift horses are, they pale in comparison
with federal government inaction when it comes to policing
financial predators who inflate their balance sheets with
laundered drug money and loot derived from terrorist
financing and organized crime.
As Yury Fedotov, the Executive Director of the United
Nations Office on Drugs and Crime (UNODC), pointed out in
that agency's 2011 report,
Estimating Illicit Financial Flows Resulting from Drug
Trafficking and Other Transnational Organized Crime:
"Prior to this report, perhaps the most widely quoted figure
for the extent of money laundering was the IMF's 'consensus
range' of between 2-5 per cent of global GDP, made public in
1998. A study-of-studies, or meta-analysis, conducted for
this report, suggests that all criminal proceeds are likely
to have amounted to some 3.6 per cent of GDP (2.3-5.5 per
cent) or around US$2.1 trillion in 2009."
The UNODC research team averred: "If only flows related to
drug trafficking and other transnational organized crime
activities were considered, related proceeds would have been
equivalent to around US$650 billion per year in the first
decade of the new millennium, equivalent to 1.5% of global
GDP or US$870 billion in 2009 assuming that the proportions
remained unchanged. The funds available for laundering
through the financial system would have been equivalent to
some 1% of global GDP or US$580 billion in 2009."
However you slice these grim estimates, it should be obvious
that banks have every incentive to remain key players
in the transnational narcotics complex and will continue to
do so thanks to the federal government.
Last week, the Office of the Comptroller of the Currency
(OCC) released their
cease-and-desist order against JPMC.
Unlike other drug money laundering banks such as Wells
Fargo-owned Wachovia Bank, which agreed to a mere $160
million (£100.86m) settlement in 2010 in a deferred
prosecution agreement (DPA)
after admitting to laundering upwards of $368 billion
(£231.99bn) for Colombian and Mexican drug cartels or the
recent $1.9 billion (£1.2bn)
DPA with Britain's HSBC global financial empire, the
OCC's consent order didn't even impose a fine on JPMC for
money laundering "lapses."
Now that's juice!
Though short on details the order however, is a damning
indictment of JPMC "indiscretions" when it comes to drug and
other criminal money laundering. Keep in mind this is an
institution that was slapped with an $88.3 million (£55.66m)
fine less than 18 months ago for shipping a ton of gold
bullion to Iran in breach of harsh Treasury Department
sanctions. (I neither endorse nor support draconian
sanctions imposed by the imperialists on the Islamic
Republic, my purpose here is to point out the double
standards which would land the average citizen in the
slammer under "material support" statutes for trading with
Iran). The January 2013 Consent Order stated although the
Comptroller found serious "flaws" in their accounting
practices, "the Bank neither admits nor denies" the
(1) The OCC's examination findings establish that the
Bank has deficiencies in its BSA/AML [Bank Secrecy
Act/anti-money laundering] compliance program. These
deficiencies have resulted in the failure to correct a
previously reported problem and a BSA/AML compliance
program violation under 12 U.S.C. § 1818(s) and its
implementing regulation, 12 C.F.R. § 21.21 (BSA
Compliance Program). In addition, the Bank has violated
12 C.F.R. § 21.11 (Suspicious Activity Report Filings).
(2) The Bank has failed to adopt and implement a
compliance program that adequately covers the required
BSA/AML program elements due to an inadequate system of
internal controls, and ineffective independent testing.
The Bank did not develop adequate due diligence on
customers, particularly in the Commercial and Business
Banking Unit, a repeat problem, and failed to file all
necessary Suspicious Activity Reports ("SARs") related
to suspicious customer activity.
(3) The Bank failed to correct previously identified
systemic weaknesses in the adequacy of customer due
diligence and the effectiveness of monitoring in light
of the customers' cash activity and business type,
constituting a deficiency in its BSA/AML compliance
program and resulting in a violation of 12 U.S.C. §
Wait a minute, if these were "previously identified systemic
weaknesses" and if JPMC "failed to adopt and implement a
compliance program" that would shield the American financial
system from a tsunami of drug-tainted cash annually washing
through the economy, especially "in light of the customers'
cash activity and business type," why then has OCC issued
another toothless Consent Order rather than forcing the bank
to comply with the law? Accordingly, federal regulators
(4) Some of the critical deficiencies in the elements of
the Bank's BSA/AML compliance program, resulting in a
violation of 12 U.S.C. § 1818(s)(3)(A) and 12 C.F.R. §
21.21, include the following:
(a) The Bank has an inadequate system of internal
controls and independent testing.
(b) The Bank has less than satisfactory risk assessment
processes that do not provide an adequate foundation for
management's efforts to identify, manage, and control
(c) The Bank has systemic deficiencies in its
transaction monitoring systems, due diligence processes,
risk management, and quality assurance programs.
(d) The Bank does not have enterprise-wide policies and
procedures to ensure that foreign branch suspicious
activity involving customers of other bank branches is
effectively communicated to other affected branch
locations and applicable AML operations staff. The Bank
also does not have enterprise-wide policies and
procedures to ensure that on a risk basis, customer
transactions at foreign branch locations can be
assessed, aggregated, and monitored.
(e) The Bank has significant shortcomings in SAR
decision-making protocols and an ineffective method for
ensuring that referrals and alerts are properly
documented, tracked, and resolved.
(5) The Bank failed to identify significant volumes of
suspicious activity and file the required SARs
concerning suspicious customer activities, in violation
of 12 C.F.R. § 21.11. In some of these cases, the Bank
self-identified the issues and is engaged in
(6) The Bank's internal controls, including filtering
processes and independent testing, with respect to
Office of Foreign Asset Control ("OFAC") compliance are
How large were the "significant volumes" of
"suspicious activity" alluded to opaquely? Where did
they originate? Who were the "suspicious customers"
and why did JPMC not have "enterprise-wide
policies and procedures" after being previously ordered to
do so to ensure that said "suspicious customers" at foreign
bank branches didn't include drug lords or terrorist
financiers? All of these are unanswered questions for which
the Obama administration should be held to account.
In fact, according to OCC's own
regulations, 12 C.F.R. § 21.21 clearly states that the
federal government "requires every national bank to have a
written, board approved program that is reasonably designed
to assure and monitor compliance with the BSA."
At a minimum, an anti-money laundering program "must"
(this is not optional): "1. provide for a system of internal
controls to assure ongoing compliance; 2. provide for
independent testing for compliance; 3. designate an
individual responsible for coordinating and monitoring
day-to-day compliance; and 4. provide training for
appropriate personnel. In addition, the implementing
regulation for section 326 of the PATRIOT Act requires that
every bank adopt a customer identification program
identification program as part of its BSA compliance
Keep in mind that Wachovia and HSBC under terms of their
DPA's were forced to admit that illegal transactions
"ignored the money laundering risks associated with doing
business with certain Mexican customers and failed to
implement a BSA/AML program that was adequate to monitor
suspicious transactions from Mexico."
Furthermore, those risks were compounded, wilfully in this
writer's opinion, in order to inflate bank balance sheets
with drug money, through their failure to correct "systemic
deficiencies in its transaction monitoring systems, due
diligence processes, risk management, and quality assurance
On every level, JPMorgan Chase failed to comply with
existing rules and regulations that have earned penny-ante
offenders terms in federal prison.
In fact, just last week Los Angeles-based "G&A Check
Cashing, its manager, Karen Gasparian, and its compliance
officer, Humberto Sanchez" were sentenced by US Judge John
Walker to stiff prison terms,
The Wall Street Journal reported. For violating the
Bank Secrecy Act, Gasparian was "ordered to prison for five
years and Sanchez for eight months."
Are you kidding me! The Journal averred, "While it is
common for banks to face scrutiny from the U.S. for
complying with the Bank Secrecy Act, it is rare for
authorities to pursue check-cashing businesses for
anti-money laundering compliance issues, as they are often
used by the poor, who may not have the funds to maintain a
In full clown-car mode, Assistant Attorney General Lanny
Breuer, Obama's chieftain over at the Justice Department's
Criminal Division, who last month refused to file criminal
charges against drug-money laundering banksters at HSBC said
statement: "Karen Gasparian, Humberto Sanchez and their
company G&A Check Cashing purposefully thwarted the Bank
Secrecy Act, making it easier for others to use G&A to
commit illegal activity. They knew they were required to
report transactions over $10,000, but deliberately failed to
Although the OCC Consent Order does not spell out who
benefited from JPMC's "systemic weaknesses" when it came to
lax drug money laundering controls, the suspicion persists
that somewhere fugitive billionaire drug lord Chapo Guzmán
is smiling as he enlarges his stable of thoroughbreds.
Tom Burghardt is a researcher and activist
based in the San Francisco Bay Area. His articles are
published in many venues. He is the editor of
Police State America: U.S. Military
"Civil Disturbance" Planning,
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