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516180-SakethRamSamineni-FirstDraft-InvestigatingReasonsbehindtheCriminalProbesFacingJPMorgan-110916.docREASONS BEHIND CRIMINAL PROBES FACING JP MORGAN
Investigating Reasons behind Criminal Probes Facing JP Morgan
A Business Research Project
Professor: Dr. Asila Sayedi
Submitted in Fulfillment of the Requirements for
MS611
Project
By
SAKETH RAM SAMINENI
Student Id: 516180
California University of Management and Science
November 9, 2016
I. Abstract
JP Morgan’s role in the financial sector of America has been instrumental over the years. There is no financial institution in the history of America that boasts of extensive assets just like JP Morgan. However, the increasing criminal probes that are currently facing JP Morgan are threatening to derail the progress and in the process, the customers are beginning to lose trust in JP Morgan, the purpose of this project is to explore some of the reasons why JP Morgan is facing large criminal probes and in the process, establish ways in which those probes can be eliminated. This research paper recommends three recommendations to be implemented in a systematic way for the company to recognize the significance of maintaining the efficiency and the integrity of the U.S government securities, agency mortgage-backed securities, and agency debt. The three major problems associated with JP Morgan are Explore the issue of unclaimed property associated with JP Morgan in several American states, the sale of mortgage-backed securities, new business deals won. Each recommendation has got three implementations processes to be implemented in a systematic way and this recommendations will ensure that JP Morgan avoids adding more criminal probes to the already existing numerous legal claims since the recommendations will act as a guideline for its participation and operation in the market that fosters great accountability and in the process encourages integrity in its operations.. Additionally, through SWOT and PESTLE analysis, the current situation at JP Morgan is examined and in the process recommendations are made.
Contents
6 C. Mission and Vision of JP Morgan
7 B. Three Step-by-step implementation plans
8 C. Projections and Benefits of the Company Based on the Recommendations
12 b. JP Morgan PESTLE Analysis
14 V. LITERATURE REVIEW the paper should not have a section called lit review.
22 VI. RECOMMENDATIONS AND CONCLUSIONS
23 A. Establishing an ethics and anti-corruption committee
24 ii. Maintenance of concrete business environment among employees
24 iii. Promoting transparency and integrity at JP Morgan
25 B. Establishing of clear-cut measures of buying and selling of mortgage-backed securities
26 C. Establish measures that will keep track of the company assets and maintain its properties
28 VII. CONCLUSIONS why are these all CAPS? Major words firt letter needs to caps only.
29 References
II. INTRODUCTION
JP Morgan Chase and Company is situated in New York City. JP Morgan has a wide reputation in the banking sector for being an outstanding performer in the banking service provision industry. Additionally, it aims at becoming the bank that offers the best financial services in the world. It does this by helping their clients to do first class business and taking a long term approach in solving their problems. Moreover, it has a standing vision of offering their clients with first class service for the next 200 years. It has a history of showing leadership during financial crisis times which helps it to continue building its legacy in the banking industry. JP Morgan has always contributed to business affairs as well as those concerning the society and the world. The bank describes their actions as being driven and influenced by the desire to do what is right for the present and for the future as well. In 2010, JP Morgan was able to acquire full ownership of its UK joint venture and it has continued to grow continuously till the present day.
A. Background
The research topic of this report revolves around exploring some of the reasons why JP Morgan may be experiencing one of the biggest bank legal fines ever. While working as an intern at JP Morgan, the Wall Street Journal indicated that JP Morgan was offering approximately $ 3 billion to deal with unspecified criminal and legal charges probes. Additionally, the numbers are still in flux but however the bank fines it will pay, I will still go down in history as one of the biggest criminal probes in a banking and financial sector. In order for JP Morgan to move forward in terms of financial performance, it needs to curb on the numerous criminal probes it is facing.
B. Overall Objectives
This research report revolves around exploring some of the reasons why the largest bank in terms of Assets and finance in America is experiencing so many criminal probes. In this case, to solve this issue, the research project will deal with the following objectives
a. To investigate the sale of mortgage-backed securities in the course of the run-up to the financial crisis: Besides, a civil criminal investigation, this kind of criminal investigation is a very rare one and can hurt JP Morgan negatively.
b. Investigation of new business deals won by JP Morgan: Anti-bribery investigators were of the opinion that JP Morgan had obtained the services of children of powerful Chinese backgrounds to assist it in winning business deals. Such allegations can hurt the financial performance of JP Morgan negatively.
c. Explore the issue of unclaimed property associated with JP Morgan in several American states: In this case, if the bank is found guilty of aiding and abetting breach of fiduciary duty, then its image and financial performance will be hurt.
C. Mission and Vision of JP Morgan
The mission Statement that acts as a guiding philosophy of JP Morgan is to be the best financial services company in the world”. Additionally, according to the statement on their official website, the Visionary statement of JP Morgan states that “At JP Morgan Chase & Co. we want to be the best financial services in the world. Because of our great heritage and excellent platform, we believe this is within our reach.” In this case, it can be argued that the vision stamen communicates effectively what the primary values, business goals, identity and purpose of JP Morgan are.
D. Problem Statement
JP Morgan Chase is universally acknowledged as a financial holding company that offers commercial and consumer banking services under the guidance of Chase brand. Additionally, its consumer business revolves around small business, small credit cards, auto-finance, commercial term lending and equipment finance among others. However, the long strings of criminal probes that the bank is currently facing is threatening to derail its progress when it comes to asset management and banking services. The three major investigations associated with JP Morgan are Explore the issue of unclaimed property associated with JP Morgan in several American states, the Sale of mortgage-backed securities, new Business deals won.
III. Company Overview
JP Morgan is universally acknowledged as a financial holding company that was incorporated in the year 1968. Additionally, the banking finance company is involved with financial transaction processing, investment banking, financial services, and asset management. Its Chase activities are divided into four business segments and other corporate segments. In this case, the segments of the company are Corporate & Investment bank, Consumer, and Community banking sector, Asset Management, and Commercial banking. It is through this numerous company segments that the JP Morgan has gone ahead to establish a name as one of the largest asset management company in the U.S.
A. Recommendations
A. Establish clear-cut measures of buying and selling of mortgage-backed securities: A good financial set up ensures that the banking financial assets are managed well in the long-run hence making criminal probes revolving around lending of loans a rare case.
B. Establish an ethics and anti-corruption committee that will see to it that any transactions done in the name of JP Morgan are based on the regulations stipulated under the national anti-corruption committee.
C. Establish measures that will keep track of all the company properties: In so doing, the company will avoid legal claims associated with unclaimed properties
B. Three Step-by-step implementation plans
i. Establishing of clear-cut measures of buying and selling of mortgage-backed securities
a. Ran stress tests in all the markets that are served by JP Morgan
b. Focus on the market disparities and fund flows
c. Assess the consequences of the Brexit vote for its operation as well as its customers
ii. Establishing an ethics and anti-corruption committee
a. Train the top management and the individuals responsible for brokering business deals for JP Morgan on the importance of practicing integrity and the dangers associated with engaging in corruption scandals.
b. Promoting transparency and liquidity in a manner that supports the integrity of the market and financial liquidation
c. Maintaining a concrete and robust control environment while conducting business deals associated with JP Morgan
iii. Establish measures that will keep track of the company assets and maintain its properties
a. Manage extensive assets positions with integrity and care
b. Establish an external control environment that will ensure that each and every company property is in accordance with applicable regulations, laws, self-regulatory company rules and best property management rules
c. Establishing internal property and asset monitoring policies in an effort to further the ability of JP Morgan in identifying specific property trends, strategies, trends or behaviors within the property and asset management regulations that may cause triggers for mandatory business and property compliance review.
C. Projections and Benefits of the Company Based on the Recommendations
The recommendations stipulated in this research recognize the significance of maintaining the efficiency and the integrity of the U.S government securities, agency mortgage-backed securities, and agency debt. In other words, the recommendations imply that all the market participants and the public will benefit from a market place that is able to practice high level of integrity and transparency when conducting its business operations. In this case, this recommendations will ensure that JP Morgan avoids adding more criminal probes to the already existing numerous legal claims since the recommendations will act as a guideline for its participation and operation in the market that fosters great accountability and in the process encourages integrity in its operations.
IV. INDUSTRY ANALYSIS
A. Introduction
JP Morgan Chase is universally acknowledged as a financial holding company that offers commercial and consumer banking services under the guidance of Chase brand. Additionally, its consumer business revolves around small business, small credit cards, auto-finance, commercial term lending and equipment finance among others (Smart & Creelman, 2013). Moreover, the company offers services in fiancé to governments, corporations, institutional investors, and wealthy individuals under its JP Morgan brand. Furthermore, it also deals in financial transaction activities, private equity services, and asset management (Anderson, 2013). In essence, the bank coupled with its non-bank activities operate throughout the country, through subsidiaries and overseas branches, subsidiary foreign banks and representative offices. However, its main headquarter offices are found in The United States in New York City (Pultarova, 2014).
A number of challenges, one being the long strings of criminal probes that have hampered its reputation and financial progress has of recent faced JP Morgan. Given the fact that JP Morgan is one of the dominant banking institutions in the history of America, it is somewhat questionable to believe the situation the bank has found itself. One simple reason can be the fact that its management is not really keeping track of the activities that is going around the operation of the banking sector. Additionally, the criminal probes that the bank is currently facing are one of the largest penalties that a bank has ever been slammed with in the history. In fact, this is evidenced by the fact that its criminal probes are supplanting HSBC’s a $ 1.2 billion penalty that was accorded to them for money laundering. However, the problems that JP Morgan is currently facing can be analyzed using the SWOT analysis and PESTLE analysis in order to identify some of the areas that made the bank to incur some challenges and how these challenges can be solved. The SWOT analysis will be helpful in establishing the current situation at JP Morgan whereas the PESTLE analysis will be crucial in determining some of the environmental factors that either are affecting the progress of JP Morgan or can help the bank to move forward from their current situation.
B. SWOT ANALYSIS
a. JP Morgan SWOT Analysis
i. Strengths
Chase bank possesses an extensive consumer base that is one of their greatest strengths. Additionally, JP Morgan is universally accepted as the most prominent bank in America. Moreover, the iterative mergers that took place to establish this extensive banking institution imply that the accessibility and the infrastructure of the JP Morgan as a financial institution are huge (Duffy & O’Rourke, 2015). In simple terms, these financial facts clearly indicate that JP Morgan is a more stable bank as a premier banking institution that ensures that it can put up with any fiscal shocks, challenges in the long –term and in the short-term; this entails the many criminal probes that it is currently facing.
ii. Weaknesses
One of the weaknesses that JP Morgan is currently facing is the fact that it has damaged its brand name over the years. In this case, a number of scandals have played a downside role in the reputation of the bank. For instance, in the year 2002, JP Morgan was fined a lump sum some $ 80 million to the U.S government for deceiving investors through a market research that was deemed biased (Duffy & O’Rourke, 2015). Moreover, another example where the trust of the consumers in JP Morgan derailed when the bank appeared to overcharge the military personnel’s mortgages. In other words, this failure to offer consumers the much- needed protection has been a repeated case for quite some time now and in the process, it may erode their long-term customer loyalty base. In the process, JP Morgan needs to establish measures that will help it review its policies on a more constant level by taking into consideration the consumer feedback extensively.
iii. Opportunities
By Merging with Bank One, JP Morgan has embarked on a number of myriad business options Duffy & O’Rourke, 2015). Additionally, this merger can be said to have opened up new business opportunities for JP Morgan by expanding its presence in the Midwest since in this region, Bank One is accepted as a market leader. By using this partnership, JP Morgan can be able to reduce the impact of the bank probes leveraged against it. Moreover, JP Morgan has established roots in over 60 countries around the globe (Anderson, 2013). However, it can be argued that the bank has an open opportunity to expand its business operations but it is not vigorously pursuing the idea.
iv. Threats
JP Morgan is facing stiff competition from international and local banking sectors most especially given the current criminal probes the bank is facing and the restrained economic climates (Kaur & Malhotra, 2016). Now, it can be argued that the bank has tried, as much as possible to remain afloat based on the rich vein of assets and financial probes it possesses (Anderson, 2013). In this case, JP Morgan has to establish ways that can ensure that its criminal probes does not offer a competitive advantage to its competitors like Citigroup (Professional academy, 2016).
C. PESTLE ANALYSIS
b. JP Morgan PESTLE Analysis
PESTLE stands for Political, economic, social, technological, environmental and legal (Professional academy, 2016). This analysis is mainly used to analyze the external environmental factors.
i. Political factors
Being a multinational banking institution that operates around the globe, JP Morgan has a number of political factors that are affecting its overall banking performance (Duffy & O’Rourke, 2015). Additionally, being a multination asset company is much profitable but any instability in the political factors in the country in which they are operating may result in adverse implications (Anderson, 2013). In this case, heavy taxations and legal assistance because of the high criminal probes that the Bank ids facing can result into a high and fall situation to the banking sector (Anderson, 2013). In fact, it is because of the heavy legal penalties and regulations that JP Morgan is currently under criminal probes.
ii. Economic factors
JP Morgan is one of the leading financial asset management banks in the history of America. In this case, by analyzing its economic environment, it is clear that the current situation in the banking industry can be effectively being determined (Duffy & O’Rourke, 2015). In this case, Because of the inflation situation in the U.S, most investors are of the opinion that the unprecedented monetary and fiscal stimulus can result in the reduction in value of the U.S Dollar and in the process, lead to higher level so inflation. In so doing, this can make JP Morgan to lose its potential investors in the wake of the on-going criminal probes for fear of the company collapsing. On the consumer level, based on the current situation, it can be said that the consumer confidence of JP Morgan is admirably high (Kaur & Malhotra, 2016).
iii. Social
The cultural and social influences to business operations vary depending on the country. In this case, investing in a country that has stable income and labor are important for the success of JP Morgan. In this case, JP Morgan must invest in countries that possess stable income levels, stable wages, and labor (Duffy & O’Rourke, 2015).
iv. Technological
JP Morgan takes a multi-faced approach when it comes to technological sustainability that makes an important component of their operations (Duffy & O’Rourke, 2015). In this case, most of their technological adoption is mainly driven by the growth of their financial services coupled with regulatory obligations. In so doing, JP Morgan has tried to influence vendors to offer approaches and products that maintain or reduce costs while at the same time increase product utilization (Anderson, 2013). In fact, JP Morgan has established engineered solutions that ensure maximization of resource efficiency.
v. Legal
This is the most important part of the recommendation strategy mainly because the current criminal probes that JP Morgan result from the fact that it went against some legal frameworks that govern the banking sector (Duffy & O’Rourke, 2015). In other words, since JP Morgan invests heavily in cyber insurance coupled with other legal agreements that allow the government to take necessary controls in case of any malice activity, it is possible for JP Morgan to undergo various criminal probes and investigations that are allowed by the constitution and the banking sector Regulation ACT. However, by establishing legal agreements with the government that will see to it that the government intervenes in case of a problem will ensure that JP Morgan stays secure in a big way.
vi. Environment
In case of adverse climatic conditions and natural calamities like drought, then JP Morgan will be handed with a financial blow (Kaur & Malhotra, 2016). However, the challenges that can be incurred because of adverse climatic conditions and natural calamities can be dealt with through proper insurance policies (Anderson, 2013). However, as much as these assets can be recovered through insurance, it is acknowledged that any calamity on a big investment bank can cause a temporary fall in its stocks.
V. LITERATURE REVIEW
i. Criminal Probes that JP Morgan is currently Facing-Statement of the Problem
On September 24, 2016, the Wall street journal was of the opinion that JP Morgan was offering $ 3 billion to the government as settlement of an unspecified number of criminal investigations after the justice department threatened to file probes in an investigation that accompanies its pre-crisis mortgage (Krimsky & Simoncelli, 2013). In other words, this figure is believed to be enormous but based on the number of cases that the payment is meant to resolve, it would go down in history as the highest bank-payout in the financial regulation history. In other words, being one of the largest banks in the American history, it is wise to argue that individuals are not keeping track of the progress and the troubles this bank has found itself in. Apparently, its management and financial analysis team can be said to ignore their obligations based on the predicaments facing the largest bank-holding asset in the U.S. In fact, this is evidenced by the fact that its criminal probes are supplanting HSBC’s a $ 1.2 billion penalty that was accorded to them for money laundering (Shelley & Picarelli 2002).
ii. Some of the Outstanding Investigations of JP Morgan-Purpose
Residential mortgage-backed securities are some of the outstanding investigations. In this case, JP Morgan is being investigated for allegedly misrepresenting the underlying home loans quality in mortgage bonds that is it sold. Additionally, the taxpayer of the United States incurred losses of approximately$ 33 billion when the government bailed out the housing lenders of Freddie Mac and Fannie Mae. Apart from the mortgage securities probe, the Manhattan Us Attorney is establishing whether JP Morgan employees criminally blurred an investigation into an alleged manipulation of the electricity market by the bank. Another pending investigation that JP Morgan is currently facing revolves around the fact that the company was alleged to have hired the children of Chinese politicians who are believed to be very powerful in an act that was considered as bribery. In fact, some people wondered whether this was just an old-fashioned-nepotism (Shahin & El-Achkar, 2016).
iii. Dealing with Criminal Probes
Banks face extensive operating costs and complexity that is associated with businesses with an increasing scope of criminal probes and growing legal frameworks and regulatory liabilities hence highlighting the need and demand for a more unified and integrated approach to risk compliance and mitigation. Additionally, top financial executives areas of recent concerned about the ever increasing sophistication of criminal probes or rather financial crimes including terrorism financing, money laundering, fraud, tax evasion, internal threats, and bribery. In this case, while this is happening, the number of banks and financial institutions facing the wrath of the legal framework and regulatory policies in the UK, U.S, and other European Union countries has increased tremendously in recent years. In fact, the increasing level of territorial enforcements has increased the challenges associated with the banking compliance hence increasing the complexity and complexity of business operations (Sudjianto et al., 2015).
Banks have invested heavily in compliance management and risk management. However, their fragmented and dispersed approach to crimes of financial nature has possessed limited success when it comes to staving off adversaries, threats and realizing the regulatory requirements of financial institutions. In so doing, this has resulted in increased money spending and violations on regulatory compliance. One sure thing is the fact that banks need to reestablish their approach to dealing with financial crimes while at the same time fostering regulatory compliance. It is important for banks to establish ways in which they can adapt to the ever-changing regulatory and criminal landscape. To realize these objectives the banking sector must conduct a risk assessment based on the products of the bank, geographies, products, and services to better understand the threat and adversaries environment. Second, the banking sector should integrate efforts incorporated from various disciplines as far as financial crime prevention is concerned across the company to identify overlaps and synergies in individuals, technologies, processes that will ensure that it reduces redundancies and in the process , it helps in streamlining the banking processes (Harrison & Ryder, 2016).
Moreover, the banking sector should as well improve on data quality and availability to obtain a holistic picture of the adversaries, entities and the reasons behind these threats. In so doing, this will ensure that subtle and complex threats are uncovered as well as emerging ones effectively and early enough. Another important way of avoiding criminal probes is by nurturing a culture that is full of integrity and high ethics by establishing accountability standards, controls, and policies while at the same time working day and night to increase employee awareness and interrelating closely with employee awareness. Furthermore, actively participating in the initiatives postulated by the financial industry should be another policy that must be undertaken to reduce the level of risk and improve employee compliance (Gottschalk, 2016).
iv. The Growing Burden of Criminal Probes and Regulatory Compliance-Implementation
It is universally acknowledged that criminals are more sophisticated especially when its matters to do with cyber crime and financial matters, hence so many financial sectors are trying as much as possible to catch up with the innovative exploitation of these risks. As of recent, exponential regulatory frameworks, demands for compliance and transparency coupled with hefty penalties for non-compliance have pressurized banks both on the operational and financial level. It is acknowledged that a number of drivers such as rising transaction volumes coupled with technological advancements have formulated new ideas for financial malfeasance. In essence, criminals manipulate the financial sector of the banks by using innovative algorithms coupled with complex schemes across sectors and channels. It is for this reason that banks must be able to establish measures that can guard against internal employee threats. Apparently, these financial probes are not only affecting the big banks but the small financial institutions are also victims of criminal probes. Small banks are also easy targets for criminal activities, as most of them are known to lack robust systems that can fend off growing risks and threats (TaJPour, Ibrahim & Zamani, 2013).
v. Surging Compliance Costs and Surging Regulatory Scrutiny
Regulators across the universe are believed to have intensified their assessment and scrutiny of heavy fines to banks that end up disobeying or failing to adopt the appropriate banking Secrecy Act that goes hand in hand with the Anti-Money Laundering program. For instance, statistics indicate that between the year 2007 and 2014, financial institutions in the banking sector paid approximately $21 billion in cumulative criminal probes fines in the United States alone. One notable issue is the fact that banks around the globe are challenged frequently with emerging AML compliance and regulatory requirements. For instance, the long awaited mortgage loan beneficiary ownership rule stipulated by the financial Crimes Enforcement network that will require financial institutions including banks to identify and acknowledge the true owner of company’s properties and mortgage loan bearer behind the financial transactions that take place in the bank. It is also important for banks to comprehend and analyze the ongoing assessment of the U.S Anti-Money laundering framework (Suja & Raghavan, 2014).
Government criminal probes want financial institutions like banks to be more responsible when it comes to prevention of financial crime by reporting any suspicious financial criminal threat. In dealing with the issues raised in this regulation, Most banking sectors around the globe have made notable efforts to enhance their skills and their transaction monitoring systems that ensure that they acquire greater abilities, knowledge about their customers coupled with the number, type and the magnitude of transactions they make. Others have focused on recruiting individuals that are highly skilled in a matter of risk compliance and investigations. Another potential area of concern is the potential shortage of trained compliance experts that is surpassed by the increasing need and responsibilities of compliance experts. In fact, for those small-scale banking and financial sectors, the issue of criminal problems and regulatory compliance has become a growing issue of concern. One of the reasons behind this increasing burden revolves around the fact that their compliance programs are not updated (Jacob & Antony, 2014).
vi. Challenges Faced when Fighting Criminal Probes
It is universally acknowledged that keeping up, with the ever-increasing regulations and criminal probes ids becoming one of the most challenging tasks for banks but the most proven challenge is non-compliance because it is even more costly. Some of the fines and costs encountered when a bank fails to comply with the regulations and acts that govern the financial integrity of the banking sector are remediation, monetary fines, and unquantifiable implications of investor dissatisfaction coupled with the reputational damage to the company image. Additionally, banks have tried to invest heavily in ensuring that they meet the regulatory requirements while at the same time strengthening security. However, such efforts are undervalued by their constant piecemeal approach to curbing issues of financial integrity and other financial related crimes (Krimsky & Simoncelli, 2013).
Without unified data from a number of channels and geographies, it is as well harder to identify suspicious financial activities or to get a unified view of organization-wide risk. Enhancing the ability to detect, prevent and report financial crime and at the same time contain escalating regulatory and compliance costs is the biggest challenge that financial institutions face (Quigley, 2015).
vii. Steps of Fighting Financial Crime
In reality, there does not exist a single perfect way to curb financial crime. Financial institutions need to take a number of steps to acquire more experience in fighting threats and navigating the complex regulatory fields. Tailoring the approaches aimed at managing financial crime risks acts as the first step towards fighting financial crime. Development and application of effective controls have become knowledgeable about the potential risks and the areas that they impact most. On identification, a risk assessment should be carried out based on the institution’s proneness to risks that could be determined by the size, channels, customer types as well as nature of products and services, geographical location. Mapping the acquired risk information against the existing internal policies and control procedures, financial institutions could then access their efficiency in mitigating risks and make changes where they emerge necessarily. Continuous should as well be conducted to ensure relevance of findings (Casas-Zamora, 2013).
Addressing silos is a key aspect in fighting financial crime. A wide spectrum of types of financial crimes exists but often goes unnoticed because of the fact that the disciplines operate in silos. Integrating and merging various internal functions aimed at preventing financial crime could help to manage the growing sophistication of the crimes. Such integration, however, could increase the vulnerability to cyber-attacks and alternatively improving communication and coordination among the teams is advised. Integration of transaction monitoring in the cyber-crime and AML disciplines could mark a starting point. Since the teams tend to overlap in terms of their data requirements, systems, and processes, they as well tend to face similar challenges. If the cyber-security team issues a cyber-attack alert, for example, the AML function is given the chance to enhance transaction scrutiny and prevent money theft. On the other hand, the fraud prevention team could take action to prevent monetization of the stolen customer data while investigating the perpetrators at the same time. Collaboration of departments in such a way enables banks to acquire increased efficiencies in monitoring transactions and investigation tracking. Security gaps could as well be filled, reduce redundancies enable streamline processes and innovate models are capable of identifying and preventing highly sophisticated crimes (Girod, 2014).
Data challenges are the main contribution towards ineffective attempt to fight financial crimes. The ability to integrate efforts lies deep in the ability of banks to acquire high-quality, consistent and reliable information from across the organization. To overcome data challenges, banks may need to adjust their internal policies regarding data entries and management. Policies should provide for standardization of customer records, transactions as well as crimes and unstructured data from across the bank. Standardization works a great deal towards improving the quality, accuracy and usefulness of available data in achieving financial crime control (Shahin & El-Achkar, 2016).
viii. Benefits of Addressing Criminal Compliance and Dealing with Criminal Probes
Analysis of data as well contains an important aspect in detecting and preventing increasing threats. Acquisition of data should not be the only data process towards decision-making. Analyzing data before declaring its use is important to understand risks posed by customers, transactions, and other parties and realize complex threats that affect multiple business lines. Transactions that may appear genuine in one channel may turn out to be malicious when viewed from another point across the bank that therefore calls for a keen analysis of available data to help to identify possible threats and malicious transactions. Keen analysis may as well enable the bank to point out inside threats and breaches that could have aided financial crimes (Arvind, Gray & Wilson, 2016).
Addressing culture and people challenges in most times lead banks out of financial crime. Senior management could set a tone that drives the organization towards or against financial crimes. Banks need to set standards of transparency and accountability, establish policy controls to enhance compliance. Zero tolerance towards potential threats should be shown to help set a culture of conformity. Maximum awareness should be created on emerging potential threats by updating employees on emerging risks and sensitize them on various loopholes that can be used by criminals to attack (Yeoh, 2016).
Banks need to establish collaborations with industry-wide initiatives to achieve a consolidated approach towards curbing financial crime. Collaboration helps to avoid duplicating efforts across the industry, facilitate creation best practices and standards and enhance innovation. Collaborating with the government could help financial institutions to take financial crime control to a more efficient level. In the UK for instance, Joint Money Laundering Intelligence Taskforce was set up to study scales, methods that were employed in money theft, suggest correction measures, and to enable effective intelligence sharing across parties (Shelley & Picarelli, 2002).
VI. RECOMMENDATIONS AND CONCLUSIONS
The long strings of criminal probes that the bank is currently facing is threatening to derail its progress when it comes to asset management and banking services. In other words, the criminal probes are now making the once extensive base of customers to lose trust in the bank and in the process, JP Morgan risks incurring losses in the long run is this long strings of cases is not dealt with effectively. In other words, this long string of cases is believed to be as a result of poor management in assets, property and financial operations. It is therefore important for JP Morgan to establish strategies that will ensure that issues of corruption and greed in the company are dealt with and in the process, ensure that the company promotes integrity and honesty among its workers .In so doing, it will ensure that all the legal requirement s are well dealt with
A. Establishing an ethics and anti-corruption committee
Ethics are the values and principles an individual possess to govern his decisions and activities. Additionally, in an organization, ethical codes are a set of principles that are able to guide the company in its policies, programs, and decisions for the business. In other words, the ethical philosophy employed by an organization is very crucial to the productivity, reputation and the bottom line of the business operations (Shahin & El-Achkar, 2016).
i. Leadership ethics
Training the top management and the individuals responsible for brokering business deals for JP Morgan on the importance of practicing integrity and the dangers associated with engaging in corruption will be crucial in eliminating some of the negative implications caused by criminal probes (Ferrell & Fraedrich, 2015). The ethics that leaders in an organization employ to control and mange employees may as well play a very crucial role in the overall functioning of the organization since it affects the loyalty and morale of its works (Harrison, & Ryder, 2016). Therefore it is important for JP Morgan to establish a code of ethics that its leaders may employ in determining acceptable behavior in the organization and discipline procedures. In this case, education and a higher level of training in ethical matters may assist JP Morgan to reduce the number of criminal probes that it is currently facing (Jacob & Antony, 2014). Apparently, when leaders demonstrate exemplary ethical behavior, it can be noted that the reputation of the company in the financial circles and the community are enhanced. In essence, a solid reputation for JP Morgan in the financial market may help it to regain some of the lost customer trust and hence reduce the level of involvement in fraud activities.
ii. Maintenance of concrete business environment among employees
One advantage that ethical behavior does to an organization regarding the employee’s behavior is the fact that, an ethically sound worker always upholds integrity and completes his work with honest. Additionally, those workers who use ethics as the moderating factor of their behavior are acknowledged to adhere to the company’s rules and reputations while at the same time striving to realize the goals and objectives of the organization. Moreover, ethical employees also meet the required work standards in terms of quality and deadlines.
iii. Promoting transparency and integrity at JP Morgan
Leaders and workers adhering to the ethical code of conduct while at work always establish an ethical organizational culture. In this case, through proper training, JP Morgan management team can establish a great atmosphere in terms of ethical culture by acting as role models (Suja & Raghavan, 2014). In other words, JP Morgan can as well reinforce the ethical behavior by giving rewards to employees who are known to exhibit integrity and values that coincide with the code of the company and disciplining those members that disobey the company’s code of conduct (Gottschalk, 2016). With an ethical culture in an organization, the morale of the workers are high and in the process, the financial performance and net revenues of JP Morgan will improve hence reducing the chances of being involved in illegal transactions to boost their financial position.
B. Establishing of clear-cut measures of buying and selling of mortgage-backed securities
i. Assessing the impact of Brexit vote
The implications of Brexit vote could go either way and it is accepted that only time will be able to give a clear picture of what is at stake. Consequently, it can be argued that even if Britain maintains its connection with other European countries, the seeds of uncertainty as far as some of the global financial institutions like JP Morgan have already been planted. In this case, the Brexit vote is troubling and endangering the rejection of economic integration and free trade since the survival of Europe and other global financial institutions can only survive if its members and workers are able to make shared sacrifices. In this case of JP Morgan, the members must be able to do everything within their power to stop the company from doing something that is forbidden under the law to avoid the consequences of criminal probes.
ii. Focus on the market disparities and fund flows
JP Morgan is committed to being one of the most respected and influential financial institutions around the globe growing its communities globally and serving its customers well. However, the ongoing financial probes are trying to reduce its progress as a financial institution. Therefore, to realize its objectives, JP Morgan must establish strategies that enable it to deliver superior long-term values, satisfaction, and benefits to its shareholders (Ferrell & Fraedrich, 2015). In other words, it is through maintaining and building a vibrant and healthy company that they may be able to make investments in the long-run. In other words, its activities must be unquestionably sound in terms of legal requirements so that it may be able to avoid the heavy penalties and fines that are slammed on organizations when they fall on the wrong side of the law.
iii. Developing a training plan that encourages legal compliance
Before JP Morgan establishes a training program that will ensure that its members and the organization at large complies with the legal requirements, it is important for it to conduct a research about the current situation that the company is going through. In other words, most employers are of the opinion that good training program is instrumental in the success of the organization hence the company that can realize positive revenues is the one that will establish a training program that is unique and different from other competitors (Quigley, 2015). In essence, some of the training skills that can be developed at JP Morgan include literary, organization orientation, technical skills and other skills in relationship to property management and acquiring (TaJPour, Ibrahim & Zamani, 2013). In the case of JP Morgan, training programs to prevent sexual harassment, lawsuits and other programs designed to curb issues of audits safety training coupled with ethical training will be very influential in helping it to solve its challenge of criminal probes (Jacob & Antony, 2014). Moreover, it is important for JP Morgan to establish measures that will ensure that the person conducting the training program as the supervisors is qualified in matters of the law. In simple terms, mostly companies training programs fails because the training supervisor does not possess the necessary skills in the field required to develop the worker's ability (Arvind, Gray & Wilson, 2016).
C. Establish measures that will keep track of the company assets and maintain its properties
In an organization, company assets are so important to make the company function properly. Therefore the company should take measures and decisions to keep track and maintain its assets.
i. The use of reasonable care
The employment of reasonable care by an employer can be established in cases where the employer of an organization disseminates, establishes and enforces an anti-harassment policy coupled with a clear explanation of the conduct that is prohibited periodically to each and every worker of the organization. In the case of JP Morgan, the top management must establish a clearly described complaint process that will see to it that any public complaints, government investigations, and criminal probes that are currently on-going are clearly accessible to ensure a forthright solution is arrived at amicably (Yeoh, 2016).
ii. Manage extensive assets positions with integrity and care
Assets of a financial institution are one of the most crucial and fundamental assets of the organization. In this case, In order for JP Morgan to avoid legal probes associated with property mortgages, it should establish clear measures in place that ensures that the company is operating with a high level of integrity (Shelley & Picarelli, 2002).
iii. Establish an external control environment that will ensure that each and every company property is in accordance with applicable regulations, laws, self-regulatory company rules and best property management rules
External control environments will ensure that JP Morgan keeps track of all the assets controlled by its name. In this case, this can be achieved through establishing internal property and asset monitoring policies in an effort to further the ability of JP Morgan in identifying specific property trends, strategies, trends or behaviors within the property and asset management regulations that may cause triggers for mandatory business and property compliance review (Sudjianto, et al, 2012).
VII. CONCLUSIONS
JP Morgan under its operational brand name Chase is one of the largest banks in the United States. It boasts of a large customer base since it serves individuals internationally because of its extensive banking assets. A number of challenges, one being the long strings of criminal probes that have hampered its reputation and financial progress has of recent faced JP Morgan. Given the fact that JP Morgan is one of the dominant banking institutions in the history of America, it is somewhat questionable to believe the situation the bank has found itself. One simple reason can be the fact that its management is not really keeping track of the activities that is going around the operation of the banking sector. Therefore, in order to solve the current problems facing JP Morgan, it should consider such recommendations as introducing an ethics and anti-corruption committee that will ensure that its company operations are conducted with honesty and the needed integrity. In so doing, some of the criminal probes facing the company will be avoided. The recommendations stipulated in this research recognize the significance of maintaining the efficiency and the integrity of the U.S government securities, agency mortgage-backed securities, and agency debt. In other words, the recommendations imply that all the market participants and the public will benefit from a market place that is able to practice high level of integrity and transparency when conducting its business operations. In this case, this recommendations will ensure that JP Morgan avoids adding more criminal probes to the already existing numerous legal claims since the recommendations will act as a guideline for its participation and operation in the market that fosters great accountability and in the process encourages integrity in its operations. The company should as well ensure that it gives the recommendations enough time to produce the desired outcomes. In this case, the best time frame should be six months and above. If JP Morgan adopts the recommendations it is likely to have an increase in in total efficiency by 70%. In addition to increased efficiency, JP Morgan will experience increased client satisfaction as well as an increase in profit levels by over 23% to $400 billion.
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