JP Morgan Chase 2015 Annual Report Download - page 17

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common themes across the firm. We have
strengthened the Audit Department and risk
assessment throughout the firm, enhanced
data quality and controls, and also strength-
ened permanent standing committees that
review new clients, new products and all
reputational issues.
The eort is enormous.
Since 2011, our total headcount directly asso-
ciated with Controls has gone from 24,000
people to 43,000 people, and our total annual
Controls spend has gone from $6 billion to
approximately $9 billion annually over that
same time period. We have more work to
do, but a strong and permanent foundation
is in place. Far more is spent on Controls if
you include the time and eort expended
by front-oce personnel, committees and
reviews, as well as certain technology and
operations functions.
We have also made a very substantial amount
of progress in Anti-Money Laundering/Bank
Secrecy Act.
We deployed a new anti-money laundering
(AML) system, Mantas, which is a moni-
toring platform for all global payment
transactions. It now is functioning across our
company and utilizes sophisticated algo-
rithms that are regularly enhanced based on
transactional experience. We review elec-
tronically $105 trillion of gross payments
each month, and then, on average, 55,000
transactions are reviewed by humans after
algorithms identify any single transaction
as a potential issue. Following this eort,
we stopped doing business with 18,000
customers in 2015. We also are required to
file suspicious activity reports (SAR) with the
government on any suspicious activity. Last
year, we filed 180,000 SARs, and we estimate
that the industry as a whole files millions
each year. We understand how important
this activity is, not just to protect our
company but to help protect our country
from criminals and terrorists.
We exited or restricted approximately 500
foreign correspondent banking relationships
and tens of thousands of client relationships
to simplify our business and to reduce our
AML risk. The cost of doing proper AML/
KYC (Know Your Customer) diligence on a
client increased dramatically, making many
of these relationships immediately unprofit-
able. But we did not exit simply due to profit-
ability – we could have maintained unprofit-
able client relationships to be supportive of
countries around the world that are allies to
the United States. The real reason we exited
was often because of the extraordinary legal
risk if we were to make a mistake. In many of
these places, it simply is impossible to meet
the new requirements, and if you make just
one mistake, the regulatory and legal conse-
quences can be severe and disproportionate.
We also remediated 130,000 accounts for
KYC – across the Private Bank, Commercial
Bank and the Corporate & Investment Bank.
This exercise vastly improved our data, gave
us far more information on our clients and
also led to our exiting a small number of
client relationships. We will be vigilant on
onboarding and maintaining files on all new
clients in order to stay as far away as we can
from any client with unreasonable risk.
In all cases, we carefully tried to get the balance
right while treating customers fairly.
You can see that we are doing everything in
our power to meet and even exceed the spirit
and the letter of the law to avoid making
mistakes and the high cost – both monetarily
and to our reputation – that comes with
that. But we also tried to make sure that in
our quest to eliminate risk, we did not ask
a lot of good clients to exit. We hope that in
the future, the regulatory response to any
mistakes – if and when they happen, and
they will happen – will take into account the
extraordinary eort to get it right.