Banks Plead Guilty Of Rate Rigging, Fined Over $5 Billion

Five global banks, including JPMorgan Chase & Co and Citigroup Inc, agreed Wednesday to plead guilty to criminal charges and pay over $5 billion USD in fines, penalties and settlements, according to a report in the New York Times.

The U.S. Department of Justice forced Citigroup, JPMorgan Chase, Barclays and the Royal Bank of Scotland to plead guilty to antitrust allegations. The charges came in response to a scheme between major financial institutions to pad profits and enrich the traders involved in a large-scale manipulation of the foreign exchange market. UBS AG, a Swiss global finance company, will plead guilty to rigging the London Interbank Offered Rate (Libor,) a benchmark rate that underpins global loan interest rates, including credit cards. As USA Today notes, UBS received conditional immunity from U.S. criminal prosecution for approaching DOJ investigators to report the fraud.

In theory, the traders involved were competitors but worked together, calling themselves “The Cartel” in online chat rooms – an invitation-only group who knew exactly what they were doing. One Barclays newcomer, desperate to join the group, was warned, “Mess this up and sleep with one eye open.” U.S. Attorney General Loretta Lynch described the name as “fitting” for the group.

“It is perhaps fitting that those traders chose that name, as it aptly describes the brazenly illegal behavior they were engaging in on a near-daily basis.”

Federal prosecutors had agreed in 2012 not to prosecute UBS AG for its role in rigging the Libor, but the DOJ voided that agreement after learning that UBS was taking part in the currency-manipulation scheme. The charges represent a major step forward for the DOJ since the 2008 financial crisis, having faced criticism for being too soft on major banks, both at home and internationally. Many countries are still recovering from a crisis they hold U.S. banks primarily responsible for – banks that have, to this point, largely walked away unharmed.

Unfortunately, this remains a somewhat symbolic victory; $5 billion is a drop in the bucket when compared to the $5.3 trillion that moves through the foreign currency market every day, and the banks involved have obtained waivers from the SEC to allow them to carry on business as usual. Still, it shows the banks and the world that they’re not above the law. As previously reported by the Inquisitr, Citigroup paid out $7 billion to the DOJ last year in a settlement but this is the first time major banks have unequivocally pleaded guilty of criminal charges.

In total, UBS will pay a $203 million fine, an additional $342 million to the Federal Reserve, accept a three-year term of probation and make remedial changes to its foreign-exchange practices. Citigroup will pay $1.2 billion in fines, including a $925 million antitrust penalty. JPMorgan was fined roughly $900 million, R.B.S. about $660 million, and Barclays settled with the various groups involved, paying out a total of $2.4 billion in settlements.

[Photo by Chip Somodevilla/Getty Images]