Five major banks—Citicorp, JPMorgan Chase & Co., Barclays PLC, The Royal Bank of Scotland plc and UBS AG—have agreed to plead guilty to felony charges. Citicorp, JPMorgan Chase & Co., Barclays PLC, and The Royal Bank of Scotland plc have agreed to plead guilty to conspiring to manipulate the price of U.S. dollars and euros exchanged in the foreign currency exchange (FX) spot market and the banks have agreed to pay criminal fines totaling more than $2.5 billion. A fifth bank, UBS AG, has agreed to plead guilty to manipulating the London Interbank Offered Rate (LIBOR) and other benchmark interest rates and pay a $203 million criminal penalty, after breaching its December 2012 non-prosecution agreement resolving the LIBOR investigation.
Attorney General Loretta E. Lynch, Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington Field Office and Director Aitan Goelman of the Commodity Futures Trading Commission’s Division made the announcement.
“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 Attorney General 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.”
“The charged conspiracy fixed the U.S. dollar—euro exchange rate, affecting currencies that are at the heart of international commerce and undermining the integrity and the competitiveness of foreign currency exchange markets which account for hundreds of billions of dollars worth of transactions every day,” said Assistant Attorney General Baer. “The seriousness of the crime warrants the parent-level guilty pleas by Citicorp, Barclays, JPMorgan and RBS.”
“The five parent-level guilty pleas that the department is announcing today communicate loud and clear that we will hold financial institutions accountable for criminal misconduct,” said Assistant Attorney General Caldwell. “And we will enforce the agreements that we enter into with corporations. If appropriate and proportional to the misconduct and the company’s track record, we will tear up an NPA or a DPA and prosecute the offending company.”
“These resolutions make clear that the U.S. Government will not tolerate criminal behavior in any sector of the financial markets,” said Assistant Director in Charge McCabe. “This investigation represents another step in the FBI’s ongoing efforts to find and stop those responsible for complex financial schemes for their own personal benefit. I commend the special agents, forensic accountants, and analysts, as well as the prosecutors for the significant time and resources they committed to investigating this case.”
According to plea agreements to be filed in the District of Connecticut, between December 2007 and January 2013, euro-dollar traders at Citicorp, JPMorgan, Barclays and RBS—self-described members of “The Cartel”—used an exclusive electronic chat room and coded language to manipulate benchmark exchange rates. Those rates are set through, among other ways, two major daily “fixes,” the 1:15 p.m. European Central Bank fix and the 4:00 p.m. World Markets/Reuters fix. Third parties collect trading data at these times to calculate and publish a daily “fix rate,” which in turn is used to price orders for many large customers. “The Cartel” traders coordinated their trading of U.S. dollars and euros to manipulate the benchmark rates set at the 1:15 p.m. and 4:00 p.m. fixes in an effort to increase their profits.
As detailed in the plea agreements, these traders also used their exclusive electronic chats to manipulate the euro-dollar exchange rate in other ways. Members of “The Cartel” manipulated the euro-dollar exchange rate by agreeing to withhold bids or offers for euros or dollars to avoid moving the exchange rate in a direction adverse to open positions held by co-conspirators. By agreeing not to buy or sell at certain times, the traders protected each other’s trading positions by withholding supply of or demand for currency and suppressing competition in the FX market.
Citicorp, Barclays, JPMorgan and RBS each have agreed to plead guilty to a one-count felony charge of conspiring to fix prices and rig bids for U.S. dollars and euros exchanged in the FX spot market in the United States and elsewhere. Each bank has agreed to pay a criminal fine proportional to its involvement in the conspiracy:
- Citicorp, which was involved from as early as December 2007 until at least January 2013,has agreed to pay a fine of $925 million;
- Barclays, which was involved from as early as December 2007 until July 2011, and then from December 2011 until August 2012, has agreed to pay a fine of $650 million;
- JPMorgan, which was involved from at least as early as July 2010 until January 2013, has agreed to pay a fine of $550 million; and
- RBS, which was involved from at least as early as December 2007 until at least April 2010, has agreed to pay a fine of $395 million.
Michael L. Corbat is Chief Executive Officer of Citigroup, the world’s global bank, with approximately 200 million customer accounts and activities in more than 160 countries and jurisdictions.
Corbat has been at Citi and its predecessor companies since his graduation from Harvard University with a bachelor’s degree in economics in 1983.
From Reuters: Jamie Dimon is Chairman of the Board, President, Chief Executive Officer of JP Morgan Chase & Co. Mr. Dimon became Chairman of the Board on December 31, 2006, and has been Chief Executive Officer and President since December 31, 2005. He was President and Chief Operating Officer following JPMorgan Chase’s merger with Bank One Corporation in July 2004. At Bank One he was Chairman and Chief Executive Officer from March 2000 to July 2004. Before joining Bank One, Dimon held a wide range of executive roles at Citigroup Inc., the Travelers Group, Commercial Credit Company and American Express Company. Dimon is on the Board of Directors of Harvard Business School and Catalyst and is a member of The Business Council. He is also on the Board of Trustees of New York University School of Medicine. Dimon does not serve on the board of any publicly traded company other than JPMorgan Chase. Dimon graduated from Tufts University and received an M.B.A. from Harvard Business School.
Group Chief Executive
Antony was appointed Group Chief Executive in August 2012.
Previously Antony was Chief Executive of Barclays’ Retail and Business Banking business. He has been a member of the Group Executive Committee since 2009.
Antony started his career at Barclays, where he completed the Barclays’ Management Development Programme, before going on to hold various roles in retail and corporate banking. He then moved to Citigroup, working in both London and New York, before rejoining Barclays as Chief Executive of Barclaycard.
Antony has represented Barclays as a non-executive Director on the Board of Absa (now Barclays Africa Group). He was also on the Board of Visa Europe Ltd and the Board of Motability Operations Group plc. Since becoming Group Chief Executive, Antony has taken the lead in the development of Barclays’ Transform programme, including the introduction of a new purpose and values, with the aim of making Barclays the ‘Go-To’ Bank for customers and clients.
Barclays has further agreed that its FX trading and sales practices and its FX collusive conduct constitute federal crimes that violated a principal term of its June 2012 non-prosecution agreement resolving the department’s investigation of the manipulation of LIBOR and other benchmark interests rates. Barclays has agreed to pay an additional $60 million criminal penalty based on its violation of the non-prosecution agreement.
In addition, according to court documents to be filed, the Justice Department has determined that UBS’s deceptive currency trading and sales practices in conducting certain FX market transactions, as well as its collusive conduct in certain FX markets, violated its December 2012 non-prosecution agreement resolving the LIBOR investigation. The department has declared UBS in breach of the agreement, and UBS has agreed to plead guilty to a one-count felony charge of wire fraud in connection with a scheme to manipulate LIBOR and other benchmark interest rates. UBS has also agreed to pay a criminal penalty of $203 million.
According to the factual statement of breach attached to UBS’s plea agreement, UBS engaged in deceptive FX trading and sales practices after it signed the LIBOR non-prosecution agreement, including undisclosed markups added to certain FX transactions of customers. UBS traders and sales staff misrepresented to customers on certain transactions that markups were not being added, when in fact they were. On other occasions, UBS traders and sales staff used hand signals to conceal those markups from customers. On still other occasions, certain UBS traders also tracked and executed limit orders at a level different from the customer’s specified level in order to add undisclosed markups. In addition, according to court documents, a UBS FX trader conspired with other banks acting as dealers in the FX spot market by agreeing to restrain competition in the purchase and sale of dollars and euros. UBS participated in this collusive conduct from October 2011 to at least January 2013.
In declaring UBS in breach of its non-prosecution agreement, the Justice Department considered UBS’s conduct described above in light of UBS’s obligation under the non-prosecution agreement to commit no further crimes. The department also considered UBS’s three recent prior criminal resolutions and multiple civil and regulatory resolutions. Further, the department also considered that UBS’s post-LIBOR compliance and remediation efforts failed to detect the illegal conduct until an article was published pointing to potential misconduct in the FX markets.
Citicorp, Barclays, JPMorgan, RBS and UBS have each agreed to a three-year period of corporate probation, which, if approved by the court, will be overseen by the court and require regular reporting to authorities as well as cessation of all criminal activity. All five banks will continue cooperating with the government’s ongoing criminal investigations, and no plea agreement prevents the department from prosecuting culpable individuals for related misconduct. Citicorp, Barclays, JPMorgan and RBS have agreed to send disclosure notices to all of their customers and counter-parties that may have been affected by the sales and trading practices described in the plea agreements.
Today, in connection with its FX investigation, the Federal Reserve also announced that it was imposing on the five banks fines of over $1.6 billion; and Barclays settled related claims with the New York State Department of Financial Services (DFS), the Commodity Futures Trading Commission (CFTC) and the United Kingdom’s Financial Conduct Authority (FCA) for an additional combined penalty of approximately $1.3 billion. In conjunction with previously announced settlements with regulatory agencies in the United States and abroad, including the Office of the Comptroller of the Currency (OCC) and the Swiss Financial Market Supervisory Authority (FINMA), today’s resolutions bring the total fines and penalties paid by these five banks for their conduct in the FX spot market to nearly $9 billion.
This investigation is being conducted by the FBI’s Washington Field Office.This prosecution is being handled by the Antitrust Division’s New York Office and other criminal enforcement sections and the Criminal Division’s Fraud Section.The Justice Department appreciates the substantial assistance provided by the CFTC, OCC, FINMA, FCA, DFS, Securities and Exchange Commission, Federal Reserve Board, and the U.K. Serious Fraud Office. The Criminal Division’s Office of International Affairs and the U.S. Attorney’s Office in the District of Connecticut have also provided assistance in this matter.
Statement from the FBI
Andrew McCabe: “I am the assistant director in charge of the FBI’s Washington Field Office. As the Attorney General has explained, today’s resolution represents the results of a 19-month investigation into manipulation of the foreign exchange market. The criminality occurred on a massive scale as individual traders at the bank communicated in code in exclusive chat rooms to set price fixing on a daily basis. Simply put, the activities of these traders undermined transparent market-based exchange rate that serves as a critical benchmark to the world economy. Consumers, including companies, large corporations, investment firms, pension funds base their financial decisions on this market and ultimately made those decisions based on rigged rates.
“The foreign exchange market is largely decentralized and is lightly regulated. So with no central transactional exchange, the FBI was forced to reconstruct the fraudulent activity from a sea of data. This was a monumental task. In order to recreate the price fixing, the Washington Field Office brought together experts in fraud investigations, including special agents, forensic accountants and analysts. We essentially took the pieces of a massive jigsaw puzzle and assembled a picture of manipulation. This type of analysis in the foreign exchange market by law enforcement is unprecedented.
“In close coordination with prosecutors and regulators, the team reviewed more than 680,000 pages of financial records, conducted more than 175 detailed interviews and reviewed more than a terabyte of complex bank trading data. As a result the work revealed the collusion by traders, the subsequent anomalies in the market, and ultimately the bank’s culpability for this manipulation. This crime crossed international borders and demanded that we, too, crossed jurisdictions to closely coordinate with partners abroad, particularly the United Kingdom’s regulatory law enforcement authorities. Our legal attaches in foreign countries around the world helped facilitate this close cooperation and for that assistance we are grateful.
“This investigation shows that the FBI can and will continue to investigate the most sophisticated criminal activity. The advances in digital analysis developed by this team are now used as a model by other FBI agents around the country working on similar complex cases. At its core, the case comes down to the criminal activity of a few individuals at some of the world’s largest banks who manipulated the market for their own personal benefit. No level of criminal activity, no matter how complex, is beyond the reach of the FBI to investigate and bring those responsible to justice.
“I’d like to personally thank all the members of the investigative team at the Washington Field Office for their diligence and perseverance in seeing this case through. I’d also like to thank our partners, first and foremost at the Department of Justice, and also the men and women of the CFTC (Commodity Futures Trading Commission), the SEC (Securities and Exchange Commission), and also the Federal Reserve for their incredible assistance and cooperation in this matter.”