Chapter 4: Investigations into misconduct: What banks can do
By Aly McDevitt2024-03-21T16:00:00
For major financial institutions, multiple risk factors affect whether to keep or exit a high-risk relationship with an ultrawealthy client.
“Reputational risk, risk of class-action lawsuits, and regulatory risk are the three big ones,” said Karim Rajwani, an independent anti-financial crime consultant.
The Jeffrey Epstein-related lawsuits filed and regulatory penalties levied against JPMorgan Chase and Deutsche Bank bear out the significance of these categorical risks. The price tag of doing business with Epstein was in the hundreds of million for both institutions—not including the cost of remedial measures, such as internal investigations and monitorships, and the financial consequences of reputational damage.
Neither Deutsche Bank nor JPMorgan responded to requests for comment on these settlements.
It is clear both institutions retained the Epstein relationship for too long. In class-action lawsuits, both banks were accused of acting in reckless disregard of the fact the Epstein sex-trafficking venture used means of force to coerce young girls and women to engage in commercial sex acts.
Yet, there is a case to be made for why exiting a high-risk relationship too soon can become an inverse form of recklessness.