Big Banks Are Knee-Deep in the Dirty Money-Laundering Business

In the 2003 case, the bank acknowledged it had been  "too slow and not forceful enough" in vetting the money-transfer firm, but said it was working to tighten its money laundering safeguards. In the 2011 case, the bank said the sanction violations were isolated incidents. In the wake of the comptroller's case, the bank told the New York Times that it has been  "working hard to fully remediate the issues identified."

Mark Kornblau, a JPMorgan spokesman, declined to answer detailed questions for this story.

In a brief written statement, he told ICIJ that complying with anti-money-laundering rules "is a top priority for us. We have already made progress addressing the issues cited in the consent orders, which contain no allegations of intentional misconduct by the firm or any of its employees."

JPMorgan isn't alone when it comes to taking heat for failing to do enough to stop the flow of suspect cash. Last year U.S. authorities reached settlements with HSBC, Citigroup and UK-headquartered Standard Chartered Bank over alleged money-laundering compliance failures.

HSBC agreed in December to pay more than $1.9 billion to settle an investigation into evidence it shifted cash for rogue nations, terrorists and Mexican drug lords.

U.S. Senator Carl Levin of Michigan  said a "pervasively polluted" culture at HSBC allowed billions in suspect dollars to flow through the bank. Senate investigators said HSBC ignored warnings from Mexican and U.S. authorities that the gush of money flowing into the bank from Mexico was so large it could only be sustained by the proceeds from narcotics trafficking.

HSBC said in a statement last year that it was "profoundly sorry" for its "past mistakes."

How well major banks screen customers and cash flows is important because, in a digitally connected world, dirty money no longer travels as stacks of bills stuffed into suitcases. It moves by the click of a computer key. This makes big banks crucial gatekeepers in the financial system, giving them the power to cut off the flow of corrupt cash or allow it to roam free.

The offshore system can't be reformed, money laundering experts say, without cooperation and compliance from the banking system's biggest players.

Dennis Lormel,  former chief of the FBI's financial crimes program, says compliance watchdogs working on the payroll of big banks strive to do the right thing, but they're often locked in losing battles with bankers who are more concerned about booking deposits and doing deals than making sure the money coming in is clean.

"The business culture usually wins," Lormel says. "The business people take the risks and the compliance people are left to clean up the mess."

Offshore Players

JPMorgan and other major banks have increased their risks and rewards in the offshore world by weaving a web of branches and subsidiaries across places that have been tagged as havens for financial secrecy and criminal activity.

Secret records obtained by ICIJ reveal how many of the world's top banks – including UBS and  Clariden in Switzerland,  ING and ABN Amro in the Netherlandsand Deutsche Bank in Germany – have worked to set up their customers with secrecy-cloaked companies in the British Virgin Islands, the Cook Islands and other offshore locales.

The banks deny wrongdoing.

A 2008 U.S. government report found JPMorgan had 50 subsidiaries in Bermuda, the Bahamas and other places labeled as tax havens or secrecy jurisdictions, tied for 11th highest among the 100 largest U.S. companies.

Since then the bank has expanded its reach in some offshore centers. Its tally of subsidiaries in the Cayman Islands grew from seven in 2007 to 20 at the end of 2012, securities filings show. Over that span its subsidiaries in Mauritius — a tiny isle off Africa's eastern coast that's been called "a Cayman Islands to India" — grew from eight to 14.