JPMorgan to correct its risk management

$6 billion loss drew regulatory review

JPMorgan Chase & Co. has been ordered to take steps to correct poor risk management that led to a surprise trading loss last year of more than $6 billion.

Federal regulators also on Monday cited the bank for lapses in oversight that allowed the bank to be used for money laundering.

JPMorgan, the nation’s largest bank by assets, will not pay a fine under the agreements with the Federal Reserve and the U.S. Comptroller of the Currency, a Treasury Department agency. The bank promised to strengthen its policies and procedures to control risk and to screen customers to prevent money laundering.

The regulators each issued two cease-and-desist orders against the bank, a sanction that requires it to change its practices. They said they had found “deficiencies” in the bank’s procedures to prevent money laundering, and “unsafe or unsound practices” regarding management of risk. The order said the regulators and other government agencies could pursue further action.

The regulators said that the bank has committed to take “all necessary and appropriate steps” to correct the problems.

JPMorgan neither admitted nor denied the regulators’ findings in agreeing to the accords.

“We’ve been working hard to fully remediate the issues” related to risk management, JPMorgan spokesman Mark Kornblau said Monday. He added that the bank has also made preventing money laundering a “top priority.”

In May, JPMorgan disclosed that its London office lost billions in trades designed to hedge against risk. The bank later said that some traders had tried to hide the size of the losses.

The loss, which occurred less than four years after the 2008 financial crisis, hurt the bank’s reputation. JPMorgan had survived the crisis by taking fewer risks than its competitors.

In June, JPMorgan CEO Jamie Dimon acknowledged before congressional lawmakers that the bank made mistakes but defended its strategy for managing risk.

Still, the bank took action against several employees at the heart of the controversy. Two senior managers and the trader linked to the London trading operation were fired. The bank took back nearly two years’ compensation from them.

In addition to the firings, Ina Drew, the bank’s chief investment officer overseeing its trading strategy, retired after 30 years at the bank and voluntarily repaid two years of salary.

The second action announced Monday against JPMorgan was related to money laundering controls. The accord did not cite any specific case, but the agreement reached was similar to one Citibank struck with regulators in April.

The bank was cited for poorly monitoring potential money laundering at a time when a number of banks have been the spotlight for such abuse.

Christina Rexrode contributed to this report from New York.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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