JPMorgan’s new approach to probing suspect transactions sparks internal friction

Thu Feb 12, 2015 1:14am EST
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By Brett Wolf and Aruna Viswanatha

ST. LOUIS/WASHINGTON (Reuters) - Clashes over strategy within JPMorgan Chase & Co’s compliance operations have led to the departure of a series of managers in the past year, according to three of those who have left.

Faced with intense scrutiny after regulators found failings in its anti-money laundering (AML) program, and rising costs as it seeks to identify suspicious transactions, the biggest U.S. bank has invested in new automated systems and installed executives skilled in making bank operations more efficient.

The moves are being watched closely by the rest of Wall Street and could be adopted more widely if JPMorgan is successful in keeping compliance costs under control. A senior executive in an AML role at a rival bank said that provided there isn’t a backlash from regulators over the new approach, it will be taken up elsewhere: "We'd all copy it.“

But it has created friction with some current and former JPMorgan managers who have more of a traditional law enforcement background and are used to doing their own in-depth probes of transactions. They claim the bank is emphasizing quantity over quality in its investigations.

One of the most senior of them, former U.S. Department of Homeland Security investigations official Jerry Robinette, quit last July, saying in a resignation letter to JPMorgan that he had done so to "protect my professional reputation." He warned that the bank may be failing to satisfy regulators and sent a copy of the letter to the Office of the Comptroller of the Currency (OCC), the lead regulator for JPMorgan’s consumer and commercial bank.

At least 30 of around 50 managers of the bank's anti-money laundering investigations group have left in the past year or are due to leave, according to the three who have left and a Reuters analysis of various documents, including LinkedIn profiles. Some like Robinette are unhappy, while others are leaving because JPMorgan has closed offices, the former employees said. Those leaving include a half-dozen directors on the same level as Robinette and more than two dozen other managers who were on the tier below.

A senior compliance official at a rival bank called it the most severe "bloodletting" of AML executives the industry has seen.


A sign outside the headquarters of JP Morgan Chase & Co in New York, September 19, 2013. REUTERS/Mike Segar