The Man From FCPA noted with interest the JPMorgan Chase FCPA settlement last week coming in at a stunning $264 million in fines, penalties and profit disgorgement. A portion of this settlement was paid to the U.S. Federal Reserve Bank, which had never previously occurred in FCPA settlement. While some commentators opined such a fine by the Fed should not be considered a FCPA, if it walks like a duck and quacks like a duck, it is a duck. The Fed sanctioned the bank for its failures under both the FCPA and its own internal compliance regime so it is a FCPA duck.
Interestingly, the Fed Cease and Desist Order focused on the risk management issues raised by the bank’s failures in its anti-corruption program. This approach leads to several interesting questions about how the Fed might look at other banking institutions which have publicly announced they have ongoing FCPA investigations. These include Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc. and HSBC Holdings PLC. From the Fed Cease and Desist Order it appears that it is most concerned about how the wholesale failures of JP Morgan Chase around its hiring protocols for family members of foreign government officials impacts the bank’s “risk management framework that includes strong governance over compliance risk at all levels of management.”
The addition of a Fed enforcement action adds an interesting wrinkle to institutions subject to Fed oversight. It might also lead to state banking oversight for such cases as the focus of the Fed seems to be the bank’s own internal policies around anti-bribery and anti-corruption as much as the FCPA itself. Whatever the reason might be, it presents new complexity for any financial institution going forward. As many banks were sanctioned over LIBOR or the mortgage scandals of the past decade and entered into DPAs, they could well run afoul of those resolutions by having either FCPA violations or violations of their own internal compliance programs.