JPMorgan sets record with $2.6bn Madoff payment JPMorgan Chase bankers had concerns about Bernard Madoff for more than a decade but failed to inform US authorities, according to a damning assessment of the bank's serial inaction by the US attorney for Manhattan. The bank agreed on Tuesday to pay $2.6bn to head off a criminal prosecution and private litigation over its failures to act on its suspicions, some of which came more than a decade before Madoff's Ponzi scheme was revealed. It agreed to pay $1.7bn to the Department of Justice, $350m to the Office of the Comptroller of the Currency, $325m to Irving Picard, the trustee for the Madoff bankruptcy, and $218m to plaintiffs in class-action lawsuits. Despite amassing a giant $23bn war chest last year to cover its array of legal troubles, JPMorgan said in a regulatory filing on Tuesday that it would have to top up the reserves with another $400m and its fourth-quarter earnings, due to be announced next week, would be reduced by about $850m. The $1.7bn payment is "the largest-ever bank forfeiture," according to the office of Preet Bharara, US attorney for the southern district of New York. "JPMorgan as an institution failed - and failed miserably," said Mr Bharara. It is the latest in a string of massive penalties for the largest US bank by assets, of which about $2bn will go to victims of the $20bn Ponzi scheme. "JPMorgan failed to carry out its legal obligations while Bernard Madoff built his massive house of cards," said George Venizelos, assistant FBI director. Today, JPMorgan finds itself criminally charged as a consequence. But it took until after the arrest of Madoff, one of the worst crooks this office has ever seen, for JPMorgan to alert authorities to what the world already knew. As part of the deferred prosecution agreement, which spares the bank from criminal prosecution in exchange for the payment and a promise to reform its practices, JPMorgan admitted that it had ignored multiple red flags. This latest multibillion-dollar blow to JPMorgan had been widely expected but the amount of suspicion from different areas of the sprawling bank over two decades has never been made public before. In 1996 another bank closed Madoff's account after investigating a series of round-trip transactions with one of JPMorgan's largest private clients, who has been identified in previous court filings as Norman Levy, and determining it had no legitimate business purpose. Despite having concerns as far back as 1994, JPMorgan allowed the transactions, which mushroomed to $6.8bn, to continue and only filed a suspicious activity report in 2008 after Madoff's arrest. Twice, in 1998 and 2007, JPMorgan's asset management arm declined to invest in Madoff funds with one manager commenting that the returns were "possibly too good to be true" and citing Madoff's refusal to meet them to discuss his strategy. The suspicions were never relayed to the bank's anti-money laundering team. We recognise we could have done a better job pulling together various pieces of information and concerns about Madoff from different parts of the bank over time JPMorgan Chase In October 2008 a London-based JPMorgan analyst wrote an internal email highlighting Madoff's "odd choice" of a small accounting firm and said "there are various elements in the story that could make us nervous." The bank filed a suspicious activity report to the UK's Serious Organised Crime Agency later that month but failed to take the same action in the US. JPMorgan said: "We recognise we could have done a better job pulling together various pieces of information and concerns about Madoff from different parts of the bank over time. We do not believe that any JPMorgan Chase employee knowingly assisted Madoff's Ponzi scheme. Madoff's scheme was an unprecedented and widespread fraud that deceived thousands, including us, and caused many people to suffer substantial losses. Madoff himself predicted the payment in a 2011 Financial Times interview from the prison where he is serving a 150-year sentence. "JPMorgan doesn't have a chance in hell of not coming up with a big settlement," he said. The OCC penalty covers a variety of other failings in JPMorgan's anti-money laundering procedures. Shares in JPMorgan, which have risen in the past 12 months in spite of the legal firestorm engulfing the bank, fell 1.2 per cent to $58.31 on Tuesday in New York.