Four big banks will pay US$2.5 billion in fines and plead guilty to criminally manipulating the global currency markets going back to 2007.
JPMorgan Chase, Citigroup, Barclays and The Royal Bank of Scotland conspired with one another to fix rates on U.S. dollars and euros traded in the huge global market for currencies, according to a settlement announced Wednesday between the banks and U.S. Justice Department.
Another bank, UBS, has agreed to plead guilty to manipulating key interest rates and will pay a separate US$203 million criminal penalty.
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The criminal behaviour took place between December 2007 and January 2013, according to the agreement.
“Almost every day for five years, they used a private electronic chat room to manipulate the exchange rate between euros and dollars using coded language to conceal their collusion,” says U.S. Attorney General Loretta Lynch.
She says the activities undermined transparent market-based exchange rates.
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“Investment firms, pension funds base their financial decisions on this market and ultimately made those decisions based on rigged rates,” Lynch adds.
Separately, the U.S. Federal Reserve will impose fines totaling more than $1.8 billion against six banks for their unsafe and unsound practices in the foreign exchange markets.
The fines, among the largest ever assessed by the Federal Reserve, include: US$342 million each for UBS, Barclays, Citigroup, and JPMorgan Chase; US$274 million for Royal Bank of Scotland; and US$205 million for Bank of America.
The Federal Reserve also issued cease and desist orders requiring the firms to improve their policies and procedures for oversight and controls over activities in the wholesale foreign exchange and similar types of markets.
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It’s requiring the six organizations to improve their senior management oversight, internal controls, risk management, and internal audit policies and procedures for their foreign exchange activities and for similar kinds of trading activities and is requiring four of the organizations to improve controls over their sales practices.
The Federal Reserve is also requiring all six organizations to cooperate in its investigation of the individuals involved in the conduct underlying these enforcement actions and is prohibiting the organizations from re-employing or otherwise engaging individuals who were involved in unsafe and unsound conduct.