FINMA Reviews JPMorgan's Breach Of Anti-Money Laundering Law

Switzerland’s financial regulator FINMA, which had earlier sanctioned the Swiss subsidiary of JPMorgan Chase & Co. (NYSE:JPM) for money laundering, said that it will now conduct an in-depth review of the unit’s anti-money laundering systems. This is because the regulatory body has found that the banking giant has seriously breached anti-money laundering regulations in its dealings with the Malaysian sovereign wealth fund, 1MDB.

In June, FINMA concluded certain enforcement proceedings against the company’s Swiss unit wherein no penalties were imposed on the company because FINMA believed that any profits possibly made from the alleged violations were not significant enough.

However, now the regulator has discovered serious shortcomings in the company’s monitoring and control systems in relation to its dealings with the allegedly corrupt sovereign wealth fund.

FINMA said, “The bank seriously breached anti-money laundering regulations by failing to screen adequately transactions and business relationships booked in Switzerland associated with the Malaysian sovereign wealth fund 1MDB and one of its business partners."

The alleged infringements took place between 2009 and 2011 when in a particular case, JPMorgan failed to properly screen the transfer of “hundreds of millions" of U.S. dollars from 1MDB to the personal account of an individual, which was actually meant for business purposes.

The banking giant has also accepted that it had taken incomplete or inconsistent information from its clients without examining the content further or documenting it.

Notably, the Swiss regulator’s decision is final and JPMorgan has not yet appealed against it.

In fact, the bank said, "There is nothing more important to us than the safety and soundness of the global monetary system. The resolution announced by Finma relates to matters that took place many years ago in the Swiss private bank, and since that time, we have increased training, added staff and made improvements in monitoring and surveillance."

Though, FINMA has neither issued any enforcement proceedings against any of the individuals nor has imposed any fine on the bank, it stated, “Given the inadequacy of the bank's controls and the serious breaches which have been identified in this case, Finma will conduct an in-depth review of the bank's anti-money laundering systems. To this end, Finma has appointed a monitor to carry out an on-site review of the appropriateness and functioning of the bank's controls and monitor them on an ongoing basis."

Although JPMorgan has resolved quite a few litigation issues, it still faces probes and queries from several federal agencies and a few foreign governments for its businesses conducted in the pre-crisis period. As a result, the company’s legal expenses are expected to remain elevated, which might marginally affect its bottom-line growth in the near term.

Shares of the company have rallied 23.9% in the past year, outperforming the 16.8% growth of the industry it belongs to.



Currently, JPMorgan carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the finance space are Lazard Ltd. (NYSE:LAZ) , Ameriprise Financial Inc. (NYSE:AMP) and Federated Investors, Inc. (NYSE:FII) , each stock carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lazard’s Zacks Consensus Estimate for current-year earnings has been revised 3.8% upward for 2017 in the past 60 days. Also, its share price has increased 22.3% in the past 12 months.

Ameriprise Financial’s current-year earnings estimates have been raised 6% over the past 60 days. Further, the company’s shares have jumped 53.4% in a year.

The Zacks Consensus Estimate for Federated Investors’ current-year earnings was moved 3.4% north over the last 60 days. Moreover, its shares have gained 29% in a year.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>