US Department of Justice confirms foreign exchange criminal charges and fines for global banks

Citicorp, JPMorgan Chase, Barclays and RBS have all accepted the charges and agreed to pay more than $2.5 billion in criminal fines while a fifth bank, UBS, has pled guilty to manipulating the London Interbank Offered Rate (LIBOR) and other benchmarks and agreed to pay a $203 million fine after breaching a previous non-prosecution agreement. All five banks plus Bank of America will also pay more than $1.8bn fines to the US Federal Reserve. Barclays has settled with a number of other agencies, including the UK's Financial Conduct Authority (FCA).

Global regulators have now issued nearly $9bn worth of fines against banks for historical misconduct in the FX spot market, according to the DoJ.

Traders at Citicorp, JPMorgan, Barclays and RBS used an exclusive electronic chat room and coded language to manipulate benchmark exchange rates at various times between December 2007 and January 2013, according to the plea agreements entered into with the DoJ. These traders, who called themselves 'The Cartel', coordinated trades of US dollars and euros in order to manipulate the 1:15pm European Central Bank fix and the 4pm World Markets/Reuters fix on a daily basis, among other manipulation methods, according to the plea agreements.

Barclays has also admitted that some of its foreign exchange trading and sales practices were in breach of its previous non-prosecution agreement in relation to the DoJ's LIBOR investigation. It has agreed to pay an additional fine to reflect this. The bank has also been fined by the FCA and by the Commodities Futures Trading Commission (CFTC), the Federal Reserve Bank of New York and the New York State Department of Financial Services (NYDFS) in the US. The other participating banks settled with these agencies, over charges relating to a wider range of currencies, late last year.

The CFTC also imposed a separate fine on Barclays for attempted manipulation of the US dollar Isdafix swap rate, in the first penalty issued in relation to this benchmark.

"The penalty these banks will now pay is fitting considering the long-running and egregious nature of their anticompetitive conduct," said Loretta Lynch, US attorney general. "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 forex market is one of the largest and most liquid markets in the world with a daily average turnover of $5.3 trillion, 40% of which takes place in London, according to FCA figures.

The UK has now brought a number of the benchmark rates referred to as part of these settlements within its financial regulatory regime, including the 4pm WM/Reuters fix and Isdafix. As of 1 April 2015, the making of false or misleading statements in relation to these rates carries prison sentences of up to seven years and unlimited fines.

The most recent settlements will not prevent the DoJ from prosecuting culpable individuals for related misconduct, or affect the outcome of its additional ongoing criminal investigations into foreign exchange, LIBOR and other benchmarks, it said.