By Brett Wolf and Aruna Viswanatha

ST. LOUIS/WASHINGTON, Feb 12 (Reuters) - Clashes over strategy within JPMorgan Chase & Co's compliance operations have led to the departure of a series of managers in the past year, according to three of those who have left.

Faced with intense scrutiny after regulators found failings in its anti-money laundering (AML) program, and rising costs as it seeks to identify suspicious transactions, the biggest U.S. bank has invested in new automated systems and installed executives skilled in making bank operations more efficient.

The moves are being watched closely by the rest of Wall Street and could be adopted more widely if JPMorgan is successful in keeping compliance costs under control. A senior executive in an AML role at a rival bank said that provided there isn't a backlash from regulators over the new approach, it will be taken up elsewhere: "We'd all copy it."

But it has created friction with some current and former JPMorgan managers who have more of a traditional law enforcement background and are used to doing their own in-depth probes of transactions. They claim the bank is emphasizing quantity over quality in its investigations.

One of the most senior of them, former U.S. Department of Homeland Security investigations official Jerry Robinette, quit last July, saying in a resignation letter to JPMorgan that he had done so to "protect my professional reputation." He warned that the bank may be failing to satisfy regulators and sent a copy of the letter to the Office of the Comptroller of the Currency (OCC), the lead regulator for JPMorgan's consumer and commercial bank.

At least 30 of around 50 managers of the bank's anti-money laundering investigations group have left in the past year or are due to leave, according to the three who have left and a Reuters analysis of various documents, including LinkedIn profiles. Some like Robinette are unhappy, while others are leaving because JPMorgan has closed offices, the former employees said. Those leaving include a half-dozen directors on the same level as Robinette and more than two dozen other managers who were on the tier below.

A senior compliance official at a rival bank called it the most severe "bloodletting" of AML executives the industry has seen.





ATTRITION AN "OPPORTUNITY"

It is too early to say whether the new focus on technology will be effective or whether the loss of Robinette and the other managers has been a blow to JPMorgan in any way. The bank says it has not been hurt by the departures but will not talk about individuals.

JPMorgan officials say the bank has greatly improved the quality of its AML program, increasing staff by 300 percent, consolidating 15 offices into three in Delaware, New York and Texas, and overhauling its processes and technology. It also hired Pamela Dearden from Citigroup to serve as managing director of financial crimes compliance.

"Attrition has given us a further opportunity to hire new managers with the right skills to do this important work - some with more recent law enforcement experience, and others with a greater understanding of banking products, services and operations," said bank spokeswoman Patricia Wexler. She said there had been a "marked improvement in both the timeliness and quality" of the reports produced.

But the current strategy involves a big departure from previous approaches to tracking customers once they are suspected of having engaged in illicit activity, with a greater reliance on technology over human judgment.

A law enforcement background has traditionally been valued in AML work because a skilled financial investigator can spot patterns consistent with a variety of criminal activity, though scrutiny of hundreds or even thousands of transactions can take hours, or even days. Transaction monitoring software has improved in recent years and is capable of spotting many of the same patterns in moments, but only if it is finely tuned.

The stakes are high for JPMorgan. In 2013, regulators faulted the bank for inadequacies in its AML program. And the Department of Justice followed with a deferred prosecution agreement over the bank's failures to catch red flags during Bernard Madoff's multi-billion dollar Ponzi scheme. That agreement leaves the bank susceptible to criminal prosecution until 2016 in the event of further such lapses.

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