Here’s what you need to know about the Department of Justice’s lawsuit against JPMorgan Chase and other banks over their efforts to hide millions of dollars of profits from regulators.
The DOJ Complaint As we’ve previously reported, the DOJ filed the complaint in the US District Court for the District of Columbia, alleging that the banks violated federal law by failing to file annual disclosures to regulators that detail how their financial assets and liabilities are distributed and the extent to which they comply with disclosure requirements for investment advisers, for example.
The DOJ’s complaint, filed on December 6, outlines the bank’s “systematic failure to report information that may reasonably be expected to identify the bank or the institution in a material manner.”
The complaint alleges that the bank engaged in “reckless disregard” for federal financial laws by failing “to provide information to regulators in a timely manner,” as well as failing to provide regulators “a sufficient number of annual reports for each financial instrument” and to “correctly identify any transactions that exceed the minimum number of periodic reports that a bank must file annually.”
Additionally, the complaint alleges the banks failed to report “certain financial instruments” that the DOJ believes could be used by “predatory entities to engage in criminal activity.”
“The DOJ alleges that JPMorgan Chase engaged in a deliberate scheme to conceal the bank from regulatory scrutiny,” the DOJ’s lawsuit says.
“JPMorgan Chase did not report the amounts in its accounts or the amount of assets it held to federal regulators.”
As a result, the bank was subject to “significant, pervasive and immediate adverse economic consequences” as a result of its “failure to provide adequate information to the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the Commodity Futures Trading Commission, the Bureau of Consumer Financial Protection, the Securities and Exchange Commission, and the Department’s Office of Inspector General.”
At the end of the day, the lawsuit claims that “the bank’s failure to provide accurate and timely information is a serious financial and regulatory failure that will result in substantial economic harm to individuals and their families and is a substantial and irreparable harm to the financial stability of the United States.”
A DOJ spokesperson told the New York Times that the complaint is the “first in the history of the DOJ” and that it was “a first step in the DOJ investigation of these bank-related criminal conduct.”
On top of this, the Department also alleges that “in a series of subsequent actions, JPMorgan Chase has taken steps to protect its customers and shareholders from future criminal conduct and violations of federal law.”
So, is the DOJ Complaints Final?
The lawsuit does not seek any monetary damages, but the DOJ says it will “reopen and complete the investigation of the bank” and is “reviewing other remedies.”
Meanwhile, the bank said that it has “resolved the matter through our internal and external counsel.”
In a statement, JPMorgan said: “We will continue to fully cooperate with the DOJ and the U.S. Government in its investigation of this matter.”
JPM also said that “it has implemented new safeguards to ensure that its customer information is protected and that the information is processed and stored securely.”
While JPMorgan’s settlement is a step forward for regulators and consumers, it comes at a time when regulators are beginning to ask questions about the bank.
The Financial Services Modernization Act (FMSA) was passed in 2015 to reform the way financial institutions are regulated, which included an overhaul of how they do business, what they’re allowed to charge, and what they can and cannot do with customer information.
According to the WSJ, the FMSA, passed in the wake of the financial crisis, was meant to address the systemic nature of the problems that led to the crisis.
Under the FRSA, banks were given a “stakeholder advisory panel” that would advise them on how to reform their business and make their customers’ information more transparent and accountable.
But the FWSA was designed to be the first step, and many regulators have criticized it for allowing the banks to avoid the burden of having to meet these new requirements.
In April, a judge in Delaware agreed with a federal appeals court ruling that the FSSA is overly broad and does not do enough to protect consumer privacy.
And in November, the US Department of Education ruled that the rules are “fundamentally flawed,” and that they are “too vague, and they are so poorly articulated and poorly written that they do not even describe what is required of banks to be compliant.”
What Happens Next?
As of now, no federal court has yet ruled on the DOJ complaint.
Meanwhile the US government has asked a judge to order the banks, including JPMorgan Chase, to provide information that could help regulators identify the banks’ customers, including those who have