The US bank JPMorgan has agreed to pay $2.6bn to resolve charges that its poor oversight enabled Bernie Madoff to defraud milllions of dollars in an investment scam that collapsed in 2008.

The amount, part of a US settlement deal made on Tuesday over criminal charges, comprises $2.24 billion destined for victims of the Madoff scam and another $350 million in penalties to the Office of the Comptroller of the Currency.

JPMorgan was accused of failing to act on suspicions that Madoff, a Wall Street broker, was using his accounts to defraud his investors of millions of dollars, moved the money in while reporting to his clients huge, ultimately illusory gains.

Bank staff harbored suspicions of Madoff's activities dating back to at least 1994, yet never alerted JPMorgan anti-money laundering staff or regulators about their concerns.

"For decades, Bernie Madoff was able to launder billions of Ponzi proceeds essentially through a single set of accounts at JPMorgan," said US Attorney Preet Bharara. "The bank repeatedly ignored warning signs."

Madoff was arrested in December 2008 for fabricating account statements for tens of billions of dollars he managed.

His firm collapsed with just $300 million in assets, after having reported $65 billion. The savings of many investors, foundations and families were wiped out in the collapse, and efforts continue to claw them back.

In their deferred prosecution agreement with bank, the authorities said they would dismiss the criminal charges after two years if the bank complied with the provisions of the deal: paying the penalties, reforming its anti-money laundering policies, co-operating with ongoing investigations and reporting any wrongdoing by JPMorgan or its employees.

Bharara was asked during a news conference whether such a deal was a less effective deterrent against wrongdoing than seeking to convict the largest US bank.

"You take into consideration all factors," Bharara said, adding that there are "collateral consequences" to pursuing a criminal case against a big financial institution and employer.

A JPMorgan statement said: "We recognise we could have done a better job pulling together various pieces of information and concerns about Madoff from different parts of the bank over time.

"We do not believe that any JPMorgan Chase employee knowingly assisted Madoff's Ponzi scheme."

Source: Agencies