JPMorgan Defeats Investor Suit Over Money-Laundering Lapses

JPMorgan Chase & Co. directors don’t have to face claims that they failed to ensure the bank had robust programs to police money laundering and cost the company more than $2 billion in fines.

JPMorgan shareholders suing the bank’s board for creating a “culture of lawlessness” through lax oversight of money laundering controls can’t re-litigate claims already decided in New York’s courts, a Delaware judge ruled Wednesday.

Investors’ allegations that the failure to comply with anti-money laundering regulations damaged the bank’s reputation and exposed it to penalties “arose out the same transactions” targeted in a suit dismissed by a New York judge, Delaware Chancery Court Judge Donald Parsons concluded.

JPMorgan, the biggest U.S. bank by assets, moved to improve its anti-money laundering efforts in 2013 after federal regulators found its controls tied to bank-secrecy laws were lacking. The firm failed to find out enough about banking customers and identify suspicious activity, government officials concluded.

Bank executives said they cut off service to about 500 foreign lenders as part of the government’s crackdown on practices that facilitate money laundering, terrorism and deals with countries covered by economic sanctions.

Joseph Evangelisti, a spokesman for New York-based JPMorgan, didn’t immediately return a call seeking comment on Parsons’ ruling.

Oversight Fumbled

Lawyers for the city of Providence, Rhode Island, which oversees municipal workers’ pension funds and invested in JPMorgan shares, argued the board fumbled its oversight of the bank’s anti-money laundering efforts.

Those miscues prompted the company to pay $88.6 million to settle the government’s claims it violated economic sanctions covering Cuba, Iran and Sudan, according to court filings.

JPMorgan also was forced to pay more than $2.6 billion to resolve civil and criminal claims that it violated bank-secrecy laws in connection with financier Bernard Madoff’s Ponzi scheme.

The bank paid $1.7 billion to settle the government’s charges that it failed to take proper steps to stop Madoff’s fraud. It also shelled out $350 million for failing to report Madoff’s suspicious activities and more than $500 million to resolve litigation spawned by the scheme, which cost his investors about $17 billion.

In his 28-page ruling, Parsons noted a federal judge in New York had already ruled investors couldn’t show directors missed “red flags” about the same anti-money laundering efforts targeted in the Delaware case.

The case is City of Providence, Rhode Island v. Dimon, CA No. 9692-VCP, Delaware Chancery Court (Wilmington).

http://www.bloomberg.com/news/articles/2015-07-29/jpmorgan-defeats-claims-over-anti-money-laundering-efforts-icpcn8cs