With the know your customer laws http://en.wikipedia.org/wiki/Know_your_customer it's increasingly the bank's responsibility to do the job of regulators. This is not new. It might be dumb, but it's how the system works(or doesn't work) right now.
KYC is about not doing business with terrorists or other undesirables. Madoff was not one of those. He was running a ponzi scheme but was otherwise an upstanding citizen. No bank would have any reason not to do business with him due to KYC due diligence.
I don't disagree that JPM has a responsibility to share any information they may have about financial fraud. I guess my point is that yeah, the $1.7B fine isn't much to JPM, but at the same time, it seems inline with their degree of negligence.
The basically got fined for not doing the SEC's job.
No, that's not what they were fined for. They were fined for not doing their job, according to the Bank Secrecy Act. Which they agreed to comply with when they decided to become a bank.
You might want to read a couple of news articles about the case, before pulling "facts" out of the air like this.
The SEC's job would have been a lot easier if Madoff had chosen to keep all of his scam's money in an account with the SEC... JPM got to see both sides of the scam and at least one department figured it out and decided to profit on the knowledge.
I thought they settled in order to avoid the felonies they committed by not reporting the suspicious activity? They paid to not go to jail. Obviously, they think $1.7B is cheaper than fighting it with their huge legal team. It's not like the Feds are picking on someone defenseless here.