JPMorgan Warning Shows Banks at Risk in Hunt for Pandemic Fraud

The U.S. hunt for con men who allegedly spent pandemic relief on jewelry, strippers and at least two Lamborghinis is turning a spotlight to a less flashy realm: Community banking.

JPMorgan Chase & Co.’s stark message to employees this week that it’s probing whether any of them helped people misuse aid programs is the strongest public acknowledgment yet that members of the banking industry are suspected of being complicit. The nation’s largest lender said it’s seen evidence of abuse among customers and possibly staff, and that it’s working with law enforcement.

In less than half a year, banks have gone...