Probe focuses on JPMorgan's monitoring of suspect transactions

Sun Sep 16, 2012 9:52pm EDT
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By Carrick Mollenkamp and Brett Wolf

(Reuters) - A U.S. regulatory probe of JPMorgan Chase & Co's anti-money laundering systems is focusing on potential lapses in how the largest U.S. bank monitors suspect money transactions, according to people familiar with the situation.

The probe appears to be focused on the systems and personnel that JPMorgan uses to safeguard against illicit money flows, the sources said, declining to be identified because they were not authorized to speak to the media.

One specific angle of the probe is how the bank's systems were set up to review a high volume of suspect transactions.

Banks are required to file reports of suspicious activity but that can add to costs. Regulators and banks sometimes disagree over whether those reviews produce reports that actually identify financing tied to illegal narcotics, terrorism or sanctioned countries.

JPMorgan faces being hit with a regulatory order by the U.S. Office of the Comptroller of the Currency, which regulates national banks. That order would identify lapses and require the bank to tighten the anti-money laundering systems it uses.

The OCC and the bank declined to discuss the details of the probe.

The probe adds to problems facing CEO Jamie Dimon, whose reputation for running one of the safest U.S. banks was dealt a blow earlier this year when it suffered a $5.8 billion trading loss. A U.S. Senate committee has launched a probe into the "London Whale" trading losses.

The OCC probe - and potentially inquiries by other regulators such as the U.S. Justice Department - could still widen and identify specific transactions that allowed illicit funds to move through the bank.   Continued...

A woman walks past JP Morgan Chase's international headquarters on Park Avenue in New York July 13, 2012. REUTERS/Andrew Burton