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J.P. Morgan Chase & Co. to pay for hiring practices

11/17/2016
Fine Amount: 
$264.5 million
Penalty Type: 
Issued by: 

The Federal Reserve Board has ordered J,P. Morgan Chase & Co. to pay a $61,932,500 civil money penalty for unsafe and unsound practices related to the firm's practice of hiring individuals referred by foreign officials and other clients in order to obtain improper business advantages for the firm.

In levying the fine on JPMorgan Chase, the Federal Reserve Board found that the firm's Asia-Pacific investment bank operated an improper referral hiring program. The firm offered internships, trainings, and other employment opportunities to candidates who were referred by foreign government officials and existing or prospective commercial clients to obtain improper business advantages.

The Federal Reserve found that the firm did not have adequate enterprise-wide controls to ensure that referred candidates were appropriately vetted and hired in accordance with applicable anti-bribery laws and firm policies.

The Federal Reserve's order requires JP Morgan Chase to enhance the effectiveness of senior management oversight and controls relating to the firm's referral hiring practices and anti-bribery policies. The Federal Reserve is also requiring the firm to cooperate in its investigation of the individuals involved in the conduct underlying these enforcement actions and is prohibiting the organizations from re-employing or otherwise engaging individuals who were involved in unsafe and unsound conduct.

In a coordinated action by the Securities and Exchange Commission, J.P. Morgan Chase & Co. agreed to may $105,507,668 in disgorgement and $25,083,737 in interest to settle a case brought by the Commission. The SEC found that the firm violated the anti-bribery, books and records, and internal controls provisions of the Securities Exchange Act of 1934. The SEC's press release said that "during a seven-year period, JPMorgan hired approximately 100 interns and full-time employees at the request of foreign government officials, enabling the firm to win or retain business resulting in more than $100 million in revenues to JPMorgan." Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit, added, “The misconduct was so blatant that JPMorgan investment bankers created ‘Referral Hires vs Revenue’ spreadsheets to track the money flow from clients whose referrals were rewarded with jobs. The firm’s internal controls were so weak that not a single referral hire request was denied.”

The Department of Justice announced that JPMorgan Securities (Asia Pacific), a Hong Kong-based subsidiary of the firm, entered into a non-prosecution agreement to pay a $72 million penalty for its role in the scheme. As part of the agreement, JPMorgan APAC has agreed to continue to cooperate with the department in any ongoing investigations and prosecutions relating to the conduct, including of individuals, to enhance its compliance program, and to report to the department on the implementation of its enhanced compliance program.

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