Four of the world’s biggest banks agreed Wednesday to pay more than $5 billion in penalties and plead guilty to rigging the currency markets — a rare instance in which federal prosecutors have wrung an admission of criminal wrongdoing from a major financial institution.
Traders at JPMorgan Chase, Citigroup, Barclays and the Royal Bank of Scotland were accused of conspiring to manipulate rates on the foreign exchange market, where hundreds of billions of dollars and euros change hands.
The penalties are a victory for the government and reflect a broader effort by the Justice Department, long criticized as reluctant to prosecute big banks, to tackle financial misconduct.
In the past 12 months, prosecutors have brought criminal cases against banks accused of tax evasion and sanctions violations and have sued several others for their roles in the 2008 financial meltdown.
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Still, the punishment may have limited practical consequences, and it’s far from clear that it will deter misconduct by others.
The four banks can keep doing business in the currency markets. No executives were charged, though that part of the investigation continues. And the fines, while large, are a fraction of what the institutions have made through currency trading the past decade.
Prosecutors say the traders shared customer orders through chat rooms and used that information to profit at their clients’ expense. They called themselves “The Cartel,” and in one of those chat rooms, a Barclays employee wrote, “if you aint cheating, you aint trying.”
The banks will pay a combined $2.5 billion in criminal penalties for manipulating currency rates from 2007 to 2013. The Federal Reserve is slapping them with an additional $1.6 billion in fines. Finally, Britain’s Barclays is paying an additional $1.3 billion to British and U.S. regulators.
A fifth bank, Switzerland’s UBS, has agreed to plead guilty to manipulating key interest rates and will pay a separate criminal penalty of $203 million.
“Having to enter into a guilty plea, at the parent level by a major financial institution, is not something that they enter into lightly, nor is it something they enter into with any great joy in their hearts,” Attorney General Loretta Lynch said.
All told, including an agreement announced last year, the group of banks will pay nearly $9 billion in fines for manipulating the $5.3 trillion currency market. Still, JPMorgan Chase had $4.1 billion in revenue from its fixed-income and currencies business in the first quarter of this year alone, while Citi had $3.48 billion.
It is rare for a bank to plead guilty to wrongdoing. Even after the financial crisis, most companies reached “nonprosecution agreements” or “deferred-prosecution agreements” with regulators, paying tens of billions in fines but not admitting guilt.