JPMorgan told to fix controls

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IOL image jpmorgan sign REUTERS A sign marks the Los Angeles offices of JPMorgan. File picture: Lucy Nicholson

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.

US federal regulators also on Monday cited the bank for lapses in control that allowed the bank to be used for money laundering.

JPMorgan, America's largest bank by assets, will not pay a fine under the agreements with the Federal Reserve and the US 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 JPMorgan, a sanction that requires a bank to change its practices.

JPMorgan in May 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, also hurt the bank's reputation. JPMorgan had survived the crisis by taking fewer risks than its competitors.

US Comptroller of the Currency Thomas Curry told a Senate panel in June that the loss at JPMorgan was tied to “inadequate risk management.”

JPMorgan CEO Jamie Dimon acknowledged before lawmakers that the bank made mistakes. But he 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 bank also made a broad reshuffle of its top management, in an apparent bid to restore investors' trust.

The second action announced Monday against JPMorgan was related to money laundering controls. It was similar to an agreement Citibank reached with regulators last April.

Money laundering takes profits from the trafficking of drugs or arms or other illicit activities and passes them through bank accounts or other legitimate businesses to disguise the illegal activity.

Money laundering through banks has become a prime target for US law enforcement. - Sapa-AP

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