The US Attorney's Office for the Southern District of New York [official website] entered into a deferred prosecution agreement [text, PDF] with JP Morgan Chase & Co. [corporate website] on Tuesday, which stipulates the bank will pay $1.7 billion to the US government for its role in the Bernard Madoff Ponzi scheme. A criminal complaint was filed in the US District Court for the Southern District of New York, charging JP Morgan with two violations of the Bank Secrecy Act [federal backgrounder], which requires US financial institutions to assist US. government agencies to detect and prevent money laundering. The first charge against JP Morgan is a failure to maintain an effective anti-money laundering program, and the second charge is a failure to file a suspicious activity report to the authorities. This payment is the largest penalty ever imposed for a violation of anti-money laundering laws by the US Department of Justice. The agreement includes an obligation on behalf of JP Morgan to acknowledge the findings in the criminal investigations, cooperate in future investigations, and improve the bank's monitoring and compliance procedures.
Legal action continues from the fallout of the 2008 Madoff Ponzi scheme [JURIST news archive], which defrauded investors of approximately $65 billion. Madoff held the majority of his firm's assets in accounts at JP Morgan and it is unlikely the deferred prosecution agreement will mark the end of the the bank's legal involvement in the case. The US Supreme Court is scheduled to hold a conference [SCOTUS Blog] on Friday to discuss a pending petition brought from Irving Picard, the court appointed trustee in charge of the madoff recovery initiative [trustee website], against JP Morgan. In September a judge for the US Bankruptcy Court for the Southern District of New York ruled [JURIST report] that victims can only recover the principal amount invested without accounting for inflation over the past five years and excluding interest. Last April a judge for the US Court of Appeals for the Second Circuit rejected a suit [JURIST report] by victims against the US Securities and Exchange Commission.