Tuesday, November 24, 2020

JPMorgan Chase: Making Profit off Suspicious Money (2011-2020)


JPMorgan Chase: Making Profit off Suspicious Money (2011-2020)


            JPMorgan Chase Bank is one that has been a powerhouse in the banking industry for quite some time. The company has recently been exposed as leaked reports show that JPMorgan processed transactions from criminals and other illegal sources. The suspicious activity reports are filed to a department of the U.S. Treasury known as FinCEN. There are thousands of the reports each year, and JPMorgan was one of the companies that filed the most of these reports from 1999-2017. The suspicious money that is reported is linked to money laundering and other financial crimes. In 2011,2013, and 2014 JPMorgan had to promise that they would improve their anti-money laundering policies after being fined for poor AML policy. JPMorgan filed numerous reports over the years about money from North Korea, Malaysia, and Venezuela. They also processed transactions of Trump’s 2016 campaign strategist Paul Manafort.

            Ethical theories would analyze JPMorgan’s actions differently. Indivualists belief is that a business actions should maximize profits within the law. They would agree with the actions of the bank because technically JPMorgan did nothing illegal, and they were making a profit. Utilitarians, who believe that happiness should be maximized for everyone involved, would disagree with the actions because there were people, like some in Venezuela, who were left broke and helpless. Kantianism values rational decision making, fairness, and respect. Kant would not have agreed with the actions because the people involved were not fully aware of the situation. JPMorgan treated people as a mere means and did not make the decision based off of good will. The final ethical theory, virtue theory, states that to be ethical you need to have 4 cardinal virtues (temperance, justice, courage, prudence). JPMorgan’s actions do not embody the four virtues; instead they embody primary vices like greed and selfishness. This means that the actions would not be supported by the virtue theory.


(Timeline of events related to crisis)

The global banks have ignored numerous attempts from the U.S. trying to decrease illegal money going through the financial system. The U.S. tried to issue fines and warnings to these banks, but they were not impacted by them. One of these global banks is JPMorgan Chase. JPMorgan Chase was founded in 2000 and has been a powerhouse in the banking industry since then. They deal with billions upon billions of dollars’ worth of transactions every year. The thing about these transactions is that not all of them are legitimate or legal. Some of the money and transactions come from suspicious people, accounts, or are just suspicious in general. When these transactions come across a bank, they are required to fill out something that is called a Suspicious Activity Report and the banks are to submit it to the Financial Crimes Enforcement Network at the Treasury (FinCEN). These Suspicious Activity Reports are supposed to be kept confidential, but thousands of them were leaked and now the big banks, like JPMorgan, are left exposed.

The FinCEN at the US Treasury is responsible for going through all the SAR reports that are sent in from financial institutions. There are roughly 14,000 banks that file the suspicious activity reports. The leaked files cover from 1999-2017 and the reports question around $2 trillion (ICIJ). The reports are nothing major for the banks, all they have to do is report a transaction that they think is suspicious. An important note to point out is that the Suspicious Activity Reports do not prove any crime; they just focus attention on people/transactions that could be from illegal sources. When the banks file the reports, they are acknowledging that the transaction is linked to a potential crime. The loophole (and it’s an important one) is that the banks are only required to file the report. Once the report is filed, their duty of preventing money laundering is done, from a legal standpoint (Leopold). So, what the big banks like JPMorgan Chase were doing was submitting the reports, and the continuing to do business with the people because they were not required to stop the suspicious activity or to stop working with skeptical customers.

(Patricia Wexler, CCO of JPMorgan)

JPMorgan Chase was one of the banks that reported the most SARs to FinCEN. JPMorgan is a global leader in the banking industry and claims that they have sufficient anti-money laundering reform. A JPMorgan spokeswoman by the name of Patricia Wexler (pictured) said in a statement to Bloomberg News, “We have played a leadership role in anti-money laundering reform that will modernize how the government and law enforcement combat money laundering, terrorism financing, and other financial crimes.” JPMorgan made it seem like they were trying to change the anti-money laundering approaches and that they wanted to make things better, when in fact these leaked reports show that they were doing the opposite (Scheiber). In 2011, JP promised to improve their money laundering controls after they paid almost $90 million for violating economic sanctions. Then in 2013, they promised again to improve their controls after Treasury Officials ordered a “cease and desist” due to systemic deficiencies in their anti-money laundering efforts. Once more in 2014 JPMorgan offered again to improve their AML controls after they paid $2.6 billion in investigations related to Bernie Madoff (ICIJ).  The reports show that JPMorgan approved of over $500 billion in transactions between 1999 and 2017. JPMorgan Chase, a trusted bank, has taken part in suspicious money activity for years without anyone knowing.

JPMorgan obviously filed numerous SARs to FinCEN, and each one can’t be analyzed in full but there are a few that definitely should be mentioned. One of these involves suspicious money activity in Venezuela. Venezuela is a struggling country, and part of the reason for the struggle is because there were tycoons that made fortunes in business dealings with the Venezuelan government. These tycoons are known as Boligarchs. They moved various amounts of money that belonged to the public even as the economy was struggling (Chavkin).

(Venezuelan Citizen Apartment)

They were actually taking money from the people of Venezuela and making their own profit from it. Now, for every 3 people in Venezuela, one of them is hungry and millions of them have had to flee the country due to unsafe living conditions. JPMorgan Chase bank was one of the main banks that processed the suspicious transactions from the tycoons in Venezuela. Banks reported roughly $5 billion in SARs between 2009 and 2017 in Venezuela (ICIJ). JPMorgan reported the transactions, but then still processed them anyway, knowing that there was most likely something illegal with the money. JPMorgan processing these transactions took money away from the citizens of Venezuela and left them broke and helpless.

Another example of JPMorgan participating in money laundering acts is with North Korea. The reports show that in 2015, JPMorgan Chase informed the US Treasury about suspicious transactions linked to North Korea. The banks claimed that they oversaw $89.2 million in transactions between 2011 and 2013 that benefited numerous companies/individuals that had ties to North Korea (Lehren). JPMorgan had actually already previously filed reports on some of the companies and individuals that the transactions were going to. Even though JPMorgan had filed reports about almost everyone involved in the transaction, they still approved all of them to go through. When asked to comment on the reports, JPMorgan said that they were prohibited by law from commenting on them.

The leaked reports also showed that JPMorgan processed a lot of suspicious money from Malaysia. There was a Malaysian state fund called 1Malaysia Development Berhad (1MDB) that was originally just a government fund but was uncovered to be one of the biggest scandals in the world. It is believed that more than $4.5 billion was stolen (Ellis-Petersen). There were huge sums of money that were borrowed through government bonds and then were siphoned into foreign bank accounts. At the heart of this were some huge banks, one of them being JPMorgan Chase. One man, Jho Low, made immense profits off of this scandal and he is believed to be in China today. The people of Malaysia were furious and criticized the 1MDB plan as the main people involved in the scandal were making millions while they left the other people in Malaysia wondering where all the money is that is supposed to be improving their government/conditions.

The final example that I would like to highlight are the reports that were filed by JPMorgan Chase on Paul Manafort. For those of you who aren’t aware, Paul Manafort was President Donald Trump’s campaign/political strategist. JPMorgan processed more than $50 million in payments for Paul Manafort. Banks started to flag Manafort as early as 2012 for suspicious activity but nothing really happened until 2018 when he was convicted of fraud. It was also reported that JPMorgan filed a SAR on transactions worth roughly $300 million that involved companies that dealt with Manafort (Duffy). They also process around $7 million after Manafort had resigned from the Trump campaign. Some of the money that was reported after Manafort resigned was linked to his work with a Russian political party in the Ukraine. Mr. Manafort was convicted of tax and bank fraud and is serving a prison sentence, but JPMorgan still processed his transactions. There is no one from JPMorgan that is sitting in jail due to processing the transactions. The one question that really matters and remains here is why. Why did JPMorgan, along with many other banks, go through with these transactions? The answer is very simple and pretty obvious; they did it to make money.


            JPMorgan, if they want a successful future, needs to rebuild the relationship with some of the stakeholders involved here. JPMorgan deals with all kinds of people, money, and transactions throughout their business operations. The relationship that JPMorgan has with its stakeholders is essential and they need to maintain it. The money that was reported as suspicious comes from countries all across the world, and JPMorgan has many customers outside of the ones that were reported. These reports can steer some potential customers away from JPMorgan because it might make them suspicious as to what JPMorgan will do with their money. Patricia Wexler, the Chief Communications Officer at JPMorgan Chase is the one person that so far has made a comment on the matter. JPMorgan’s top 3 shareholders are Jamie Dimon, Mary Callahan Erodes, and Daniel Pinto and each of these three works for JPMorgan. JPMorgan needs to maintain they shareholder value and in order to do that, they are going to have to deal with this issue head on.


            This case that was mentioned above can be analyzed in various different ways. There are 4 main ethical theories, and I am going to analyze the case through the eyes of the four different theories. The first ethical theory is known as individualism. Individualism states that business actions should maximize profits for the owners of a business within the law. The primary values of individualism are the business, the owner’s choices, and the business profits. Individualism differs from the other 3 theories as it is the only one that is business focused; there is no other considerations outside of the business (Salazar).

In the case, JPMorgan is the business that is the focal point. JPMorgan processing these suspicious transactions is an action that would have been supported by an individualist. The actions of JPMorgan helped them to make a profit. “…the bank paid $2.6 billion to U.S. agencies to settle investigations over its role in Madoff’s scheme. JPMorgan posted profits of more than double that amount in just that quarter on its way to nearly $22 billion in profits for the year” (ICIJ). So, as far as making a profit goes, the decision of the company to process the transactions is supported by individualism The other important value of this is that the profit is earned within the law. Although the actions of JPMorgan can be considered wrong, what they did was completely in the law. They are only legally required to report the suspicious money through the SARs. They do not have to (legally speaking) stop the transactions and money from being processed. So, JPMorgan ignoring U.S. crackdowns and allowing the money to flow through their banks is an action that could be supported by Individualism, since JPMorgan was making a profit and doing so within the law.


            The second ethical theory that will be used to analyze this case is called Utilitarianism. The ethical rule that pairs with Utilitarianism says that business actions should aim to maximize the happiness (in the long run) for all conscious beings that are affected by the business action. The key value to this theory is the happiness of all conscious beings. Happiness can be interpreted as the satisfaction of desires of the presence of pleasure/pain. This theory is the one that covers the most people, since it considers every person that is involved in the decision process (Salazar).

            The actions of JPMorgan would not have been supported by Utilitarians. For years, JPMorgan was reporting these transactions and then continuing to process them. This allowed for a few key players, like the tycoons in Venezuela, Mr. Manafort, or Jho Low (1MDB scandal), to make immense profits while everyone else was receiving nothing. JPMorgan processed transactions that had Venezuelan citizens money in there, and now in Venezuela 1 out of every 3 people are not getting enough to eat. There are even some people that leave their stoves on for hours because matches are too expensive to buy (Chavkin). Had JPMorgan decided to not process all these transactions, then there would have been more overall happiness. The few people that profited would not be as happy, but almost everyone else would be happier if JPMorgan didn’t process the transactions. The situation in Venezuela could be a lot better than it is now, and countries wouldn’t have mysteriously lost huge sums of money. Since JPMorgan did not do this, then their actions are not supported by Utilitarians. The Utilitarians would see these actions as unethical and wrong to do.


            The third ethical theory that this case can be analyzed through is referred to as Kantianism. This theory states to always act in ways that respect and honor individuals and their choices. Use informed and rational consent of all parties to make decisions rather than lying, manipulating, cheating, or harming others to get your way. The important values to Kantianism are rational decision making, the autonomy of individuals, honesty, and freedom. Under Kantianism, decisions must be made under good will, which guarantees that people have good intentions and good reasoning to make decisions (Salazar). A huge aspect of this theory is the formula of humanity which essentially says that people should be treated as an end and not simply as a mere means (exploiting them).

            The actions under consideration here would not have been supported by Kantianism. Kantianism has heavy focus on making rational decisions that are fair and come from good will. JPMorgan’s actions do not support these values, which is why they would not be supported by Kantianism. The decision to continue to process the transactions after reporting them is one that does not come from good will. JPMorgan was continuing to go through with the transactions because they were making a profit. JPMorgan was also using the people involved in the transactions as mere means. If JPMorgan was truly concerned about the money, then the least they could have done was not process the transactions, but they also could have looked into where the money was really coming from. Instead, they chose to ignore that and use the criminals and/or illegal money to make some more quick profit. They used them as a mere means and did not look to use them as an end.

Virtue Theory

The virtue theory is the final ethical theory that this case will be analyzed through. This theory encourages that people act so as to express a variety of good character traits and so as to avoid a bad character trait. This theory values character traits that promote wellness of individuals within a society. There are four main virtues that are known as the cardinal virtues. They are courage, (Risk taking, and willingness to take a stand for the right ideas and actions) prudence (good judgement), temperance (reasonable expectations and desires), and justice (Hard work, quality products, good ideas, fair practices). These are traits that every person should have, and to be ethical you need to show more than just these traits.

 JPMorgan’s actions would not have been supported under the virtue theory. Their actions went against the cardinal virtues, especially prudence and justice. The virtues that JPMorgan are displaying are not what a business wants to display to the public. The main ethical rule that pairs with the virtue theory is that something embodies various good virtues and to avoid bad virtues (Salazar). JPMorgan’s actions were selfish and greedy, two virtues that are very bad and are known as primary vices. Although JPMorgan hasn’t admitted to knowing that the transactions that they pushed through were illegal, they reported the transactions so they were inferring that there was most likely something wrong with the money. Even knowing this information, JPMorgan passed the transactions and made profits off of them. This was selfish; they weren’t concerned about anyone else, they just wanted to make their money. Whether it be the money from Venezuela, Bernie Madoff money, Paul Manafort’s money, or the Malaysian money JPMorgan was selfish and greedy. The actions of JPMorgan do not embody the good virtues that a business should have, instead they embodied primary vices like greed and selfishness.

Ethical Justification

            Personally, the actions of JPMorgan were both unethical and deceptive. The bank was fully aware that the money or people that the money was coming from were suspicious, because they filed a report on them. Continuing to process the money made it very easy for money to be laundered and it almost made them appear as if they were fully supportive of the money laundering. Each time that they were fined or warned from the Treasury, they paid the fine and then said that they were going to change their policies. It didn’t happen. Now I think JPMorgan is at the point where they really do need to change their policies and they need to take a leadership position in anti-money laundering policies. The one thing that I can say is that the actions of JPMorgan were quite intelligent, in their own way. They were not doing anything illegal, and had these reports never been leaked they would have continued to make huge profits without anyone really knowing.

Action Plan

The current issue at hand here is that JPMorgan Chase Bank has been processing transactions that come from suspicious sources and that they have ignored numerous attempts from the U.S. trying to improve their anti-money laundering policies. This issue can be resolved given time and if the company follows some steps. First, the company will have to admit that what they did was unethical and that it was a mistake. Then, the company needs to work through and actually develop a better AML policy. If JPMorgan wants to win this battle before it starts, they need to have this prepared and should consider some reform to the SAR process.

A set of core values that this company should look to embody are honesty, responsibility, and reform. These values would show that JPMorgan acknowledges that they made a mistake, but that they are trying to move on and improve situations. Currently, JPMorgan’s mission statement is to be the best financial services company in the world. They need to shift their focus from just being a financial service to being a great financial service AND a great ethical company. Their new mission statement for the company could be along the lines of being the most secure, trusted, and best financial bank in the world. This mission statement is an improvement because it now shows that JPMorgan values people and trust as well as being the best financial bank. Shifting their focus just a little bit can truly help JPMorgan.

JPMorgan also needs to focus on ensuring ethical productivity. To do this, obviously they have to make changes to their anti-money laundering policies so that when transactions are reported as suspicious, something needs to happen. If JPMorgan edits the policy so that when a transaction is reported, it can’t be approved until the FinCEN department looks over it and determines that the money is not illegal. JPMorgan can still make some changes that will allow them to flourish coming out of this controversy. As far as firing goes, there is any one specific person that takes the blame for all of this, so firing people isn’t the best solution. If JPMorgan follows new policies and changes the company to become a stronger company then this can help them bounce back. I do think that JPMorgan could hire some of their own people that can work with the FinCEN department in order to speed up the process of determining the sources of the suspicious money.

 Right now, JPMorgan hasn’t really faced any bad publicity over the issue. The stock price took a minor hit of 3.5% and other than initial articles there hasn’t been much talk since (Rapier). JPMorgan can start to market their new mission statement and market how they are going to become a leader in anti-money laundering are things that can be done to promote that they are changing. This plan will promote business profits and productivity because JPMorgan will appear as a bank for the people. If they follow this plan than it will help them to profit because people will be more attracted to them. There won’t be any secrets in the company and this makes a company more attractive. When it comes down to a decision between choosing one of two places, most would prefer the one that provides me the best services and has the best reputation. Promoting good ethics will make JPMorgan a more attractive company and will help them to make profits coming out of this case.


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Duffy, Kate. Banks First Flagged Paul Manafort's Activity as Suspicious in 2012, the FinCEN Files Show, MSN, 21 Sept. 2020, www.msn.com/en-us/news/politics/banks-first-flagged-paul-manaforts-activity-as-suspicious-in-2012-the-fincen-files-show/ar-BB19g2lD.

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Scheiber, Noam, and Emily Flitter. “Banks Suspected Illegal Activity, but Processed Big Transactions Anyway.” The New York Times, The New York Times, 20 Sept. 2020, www.nytimes.com/2020/09/20/business/fincen-banks-suspicious-activity-reports-buzzfeed.html.

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