America’s biggest bank, JP Morgan Chase, will pay the largest bank forfeiture in history for its role in Bernie Madoff’s $60 billion Ponzi investment scam.

The bank will pay $US1.7 billion ($1.91 billion), which comes on top of a $US13 billion settlement the bank agreed to pay in November for its role in the global financial crisis.

The bank will also pay another $US350 million to settle with the United States Office of the Comptroller of the Currency.

Madoff, through his Bernard L Madoff Investment Securities LLC hedge fund operation, was revealed in December 2008 to be the operator of the largest known Ponzi scheme in history.

Convicted in 2009 of defrauding thousands of investors, he is serving a 150-year prison sentence.

Madoff kept an account at JP Morgan Chase, or banks it had bought, from 1986 until his arrest in December 2008, according to the statement of facts the bank agreed to publicly disclose.

In 2008, JP Morgan analysts began to question whether the returns shown by Madoff’s fund were too good to be true, and expressed concern the bank could not verify its trading activity or its custody of assets.

But the bank did not file any suspicious activity reports on Madoff Securities in the US until after Madoff’s arrest.

Madoff’s scheme collapsed later that year, robbing investors of more than $US60 billion.

The deal includes a two-year deferred prosecution agreement and settles outstanding investigations by multiple bank regulators into failures in JP Morgan’s anti-money laundering policies.

The bank also agreed not to apply for a tax deduction or tax credit for the $US1.7 billion payment, which will go to the victims of Madoff’s fraud.