5 Banks Plead Guilty And Pay More Than $5.5 Billion In Penalties

Earlier reports have proven true. Five banks have plead guilty and will pay more than $5.5 billion in total penalties to U.S. and European regulators to settle charges that traders rigged foreign exchange markets. USA Today reported:

"Five major banks Wednesday agreed to plead guilty to criminal charges and pay more than $5.5 billion in collective penalties... The Department of Justice, the Federal Reserve and other U.S. and European authorities and regulators said corporate units of Citicorp, JPMorgan Chase, London-based Barclays, and Royal Bank of Scotland acknowledged their traders rigged foreign exchange prices of U.S. dollars and euros from Dec. 2007 to Jan. 2013... UBS also acknowledged involvement in the rate-rigging. However, the Swiss banking giant received conditional immunity from criminal prosecution because it was the first to report foreign-exchange misconduct to DOJ investigators."

U.S. Attorney General Loretta Lynch described in the Justice Department announcement the wrongdoing:

"Starting as early as December 2007, currency traders at several multinational banks formed a group dubbed “The Cartel.” It is perhaps fitting that those traders chose that name, as it aptly describes the brazenly illegal behavior they were engaged in on a near-daily basis. For more than five years, traders in “The Cartel” used a private electronic chatroom to manipulate the spot market’s exchange rate between euros and dollars using coded language to conceal their collusion. They acted as partners – rather than competitors – in an effort to push the exchange rate in directions favorable to their banks but detrimental to many others. The prices the market sets for those currencies influence virtually every sector of every economy in the world, and their actions inflated the banks’ profits while harming countless consumers, investors and institutions around the globe – from pension funds to major corporations, and including the banks’ own customers..."

The fines by bank:

"... to pay criminal fines totaling more than $2.5 billion – the largest set of antitrust fines ever obtained in the history of the Department of Justice. And the fine that Citicorp alone will pay – $925 million – is the largest single fine ever imposed for a violation of the Sherman Act... Switzerland’s UBS AG, has agreed to plead guilty and pay a $203 million criminal penalty for breaching the non-prosecution agreement it entered in December 2012 regarding manipulation of the London Interbank Offered Rate, or LIBOR – a benchmark interest rate used worldwide. he breach of the NPA was based in part on UBS’s fraudulent and deceptive currency trading and sales practices related to foreign exchange markets, its collusion with other participants in the FX markets and its failure to take adequate action to prevent unlawful conduct after prior civil, criminal and regulatory resolutions.  In other words, UBS promised, in other resolutions, not to commit additional crimes – but it did."

The announcement did not state which, if any, bank executives would go to prison for the wrongdoing. The announcement did not state what portion, if any, of the fines would be tax-deductible. Previously, penalties and fines paid by some banks have been tax-deductible. Some experts and politicians have stated that better disclosures are needed for settlement agreements.