Regulators and law enforcement officials in the U.S. and the U.K. have handed almost US$6 billion in monetary sanctions against six major financial firms.
Four the big banks — Citicorp, JPMorgan Chase & Co., Barclays plc, and The Royal Bank of Scotland plc (RBS) — have all agreed to plead guilty to felony charges in the U.S. for conspiring to manipulate the price of U.S. dollars and euros in the FX spot market, and they have agreed to pay criminal fines of more than US$2.5 billion in total.
The five firms, along with a sixth, which is not facing criminal charges from the U.S. Department of Justice — Bank of America Corp. — were also hit with US$1.8 billion in fines from U.S. banking regulators for having “unsafe and unsound” practices in the global FX markets.
Related claims against Barclays by the U.S. Commodity Futures Trading Commission (CFTC), the UK’s Financial Conduct Authority (FCA), and the New York State Department of Financial Services (DFS), also resulted in an additional penalty of approximately US$1.3 billion against that firm.
Additionally, UBS AG has agreed to plead guilty to manipulating LIBOR and other benchmark interest rates and pay a US$203 million penalty to the U.S. DOJ in connection with those allegations. And, Barclays agreed to pay US$60 million based on a violation of a non-prosecution agreement entered into in connection with its LIBOR-related settlement.
In total, all of the settlements today for rigging global FX markets, and other benchmarks, amounts to almost US$6 billion. Including previous settlements with other regulators in the U.S. and Switzerland, these latest penalties bring the total fines and penalties paid by the five banks sanctioned today by the DOJ for their conduct in the FX spot market to nearly US$9 billion.
According to the DOJ, the five members of “The Cartel” that pled guilty to felony charges manipulated the euro-dollar exchange rate by agreeing to withhold orders to avoid moving the exchange rate against open positions held by their co-conspirators. The firms have each agreed to plead guilty to a one-count felony charge of conspiring to fix prices and rig bids for U.S. dollars and euros.
Citicorp is facing the biggest fine from the DOJ, US$925 million. Barclays agreed to pay a fine of US$650 million; JPMorgan is to pay US$550 million; and, RBS is paying US$395 million. Additionally, UBS, Barclays, Citigroup, and JPMorgan are each being fined US$342 million by the Fed; RBS is being fined US$274 million; and, Bank of America is facing a US$205 million fine.
UBS also agreed to plead guilty to manipulating LIBOR and other benchmark interest rates and pay a US$203 million penalty in connection with those allegations. And, Barclays agreed to pay an additional US$60 million based on a violation of a non-prosecution agreement entered into in connection with a LIBOR-related settlement.
In the criminal cases, the five banks also agreed to three years of corporate probation, which will be overseen by the court and will require regular reporting to authorities. They must also continue cooperating with the government’s ongoing criminal investigations.
On the regulatory side, the Fed also issued cease and desist orders requiring the firms to improve their policies and procedures for oversight and controls over their activities in the wholesale FX markets.
“Today’s historic resolutions are the latest in our ongoing efforts to investigate and prosecute financial crimes, and they serve as a stark reminder that this Department of Justice intends to vigorously prosecute all those who tilt the economic system in their favor; who subvert our marketplaces; and who enrich themselves at the expense of American consumers,” said U.S. attorney general, Loretta Lynch.
“The penalty these banks will now pay is fitting considering the long-running and egregious nature of their anticompetitive conduct. It is commensurate with the pervasive harm done. And it should deter competitors in the future from chasing profits without regard to fairness, to the law, or to the public welfare,” she said.