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Accused swindler Bernard Madoff exits the Manhattan federal court house in New York January 14, 2009. REUTERS/Brendan McDermid Accused swindler Bernard Madoff exits the Manhattan federal court house in New York January 14, 2009. REUTERS/Brendan McDermid  

Bernie Madoff may cost JP Morgan nearly $2 billion

Convicted Ponzi scheme artist Bernie Madoff might be serving his 150-year sentence behind bars, but others are still paying for his fraudulent behavior.

On Tuesday JP Morgan is expected to reach a $1.7 billion dollar settlement with the Department of Justice to help compensate the victims impacted by Madoff’s massive fraud.

In legal documents, government attorneys argued that “the Madoff Ponzi scheme was conducted almost exclusively through” various accounts “held at JPMorgan,” reports the New York Times.

The bank’s failure to alert federal authorities when they detected “certain known or suspected violations of federal law or suspicious transactions,” violated the 1970 Bank Secrecy Act, according to federal prosecutors.

The $1.7 billion payout is the largest-ever Justice Department penalty for a breach of the Bank Secrecy Act.

On Tuesday, a JPMorgan spokesman conceded in a statement that the bank “could have done a better job pulling together various pieces of information and concerns about Madoff from different parts of the bank over time.”

However, said spokesman Joe Evangelisti, “We do not believe that any JPMorgan Chase employee knowingly assisted Madoff’s Ponzi scheme.” He noted that “Madoff’s scheme was an unprecedented and widespread fraud that deceived thousands, including us, and caused many people to suffer substantial losses.”

The influential financial institution is also expected to pay further penalties to the Office of the Comptroller of the Currency and a unit of the Treasury Department that monitors money laundering at U.S. financial institutions. In total, JP Morgan will likely hand over around $2 billion to the government.

A deal with federal prosecutors will allow the bank to avoid criminal charges for two years assuming the financial giant complies with the victim payments outlined by federal prosecutors and implement further reforms to the bank’s anti-money laundering policies.

JP Morgan has already adopted more aggressive anti-fraud initiatives since Madoff fooled his clients into paying him more than $65 billion.

In 2012, the financial institution sent more than 860,000 “suspicious activity reports” to federal authorities, which made for about an 18 percent increase since 2008.

This $2 billion dollar payout is not the first multi-billion-dollar penalty the Wall Street bank has paid the government. In 2013, JP Morgan handed over a record $13 billion in settlement fees for alleged questionable sales of mortgage backed securities from failing banks it acquired in the midst of the financial crisis.

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