U.S. Said to Prepare Charges Against Banks in FX Cases

Updated on

U.S. prosecutors are pressing to bring charges against a bank for currency-rate rigging by the end of the year, and actions against individuals will probably follow in 2015, according to people familiar with the probe.

The Justice Department may seek guilty pleas from several firms, including at least one in the U.S., said one of the people, asking not to be named because details of the investigation aren’t public. While federal prosecutors have wrested convictions from foreign banks this year for wrongdoing, they’ve yet to win a guilty plea from a U.S. lender in that push, and they’re preparing for strong resistance if they attempt to do so.

Justice Department officials have vowed to hold more institutions and individuals accountable for criminal conduct amid public frustration over the lack of prosecutions against top Wall Street executives for the worst financial crisis since the Great Depression.

Starting currency-rigging prosecutions this year would help the Justice Department keep pace with regulators. The U.K. Financial Conduct Authority, the U.S. Federal Reserve, and the Office of the Comptroller of the Currency are already in settlement talks with several banks with a goal of reaching some agreements next month, people familiar with the cases have said.

U.K. Charges

The U.S. criminal investigation has moved quicker than U.K. prosecutors. The Serious Fraud Office opened an investigation in July and will announce any charges next year at the earliest, according to David Green, the London agency’s director.

Attorney General Eric Holder, in his final speech about financial crime before announcing plans last month to step down, said the currency probe was advancing quickly thanks to undercover cooperators and would probably result in charges against bankers in the coming months.

Investigators are looking into allegations that traders shared data about orders with people at other firms using instant-message groups with names such as “The Cartel” and “The Bandits’ Club.”

One focus is whether dealers sought to move the WM/Reuters benchmark rate in their favor by pushing through trades before and during the 60-second windows when the benchmark is set at 4 p.m. in London each day, a process known in the industry as “banging the close.” About a dozen banks are under investigation in the probe. More than 25 traders have been fired, suspended or put on leave since the allegations emerged last year.

UBS Immunity

UBS AG, Switzerland’s largest bank, has won immunity from the Justice Department’s antitrust division in exchange for evidence of misconduct, one of the people said. That doesn’t protect the Zurich-based lender from scrutiny from the department’s fraud section, the person said. The bank was also the first to approach the European Commission in its antitrust inquiry in a bid for leniency there.

UBS received the same immunity from Europe in a separate investigation into the rigging of interest rates in 2011.

In that probe, which is continuing, prosecutors are seeking to conclude their case against Deutsche Bank AG. They have yet to decide whether to seek a guilty plea against a unit of the bank, according to two people familiar with the investigation.

Prosecutors examining whether Frankfurt-based Deutsche Bank rigged the London interbank offered rate, known as Libor, have started coordinating with U.S. regulators to limit any impact on the firm’s business in the event they do pursue a guilty plea from the company or a subsidiary, one of the people said. Authorities haven’t made a final decision, according to the person.

Peter Carr, a spokesman for the Justice Department, and Karina Byrne, a spokeswoman for UBS, declined to comment.

U.S. Prosecutions

Deutsche Bank “is cooperating in the various regulatory investigations and conducting its own ongoing review into the interbank-offered-rates matters,” said Renee Calabro, a company spokeswoman. In that examination, the firm has found “that certain employees, acting on their own initiative, engaged in conduct that falls short of the bank’s standards, and action has been taken accordingly.”

The developments in prosecuting banks in the currency and interest-rate probes were reported yesterday by the New York Times.

Earlier this year, the Justice Department secured guilty pleas -- once viewed as a death penalty for a bank -- from Credit Suisse Group AG’s main bank subsidiary for helping Americans cheat on taxes, and from BNP Paribas SA for handling banned transactions involving Sudan, Iran and Cuba.

The U.S. Libor probe has produced settlements with five banks including UBS, Barclays Plc and the Royal Bank of Scotland Group Plc and charges against at least nine individuals. The cooperation agreements with those banks gave the government a windfall of information for its currency manipulation investigation.

Evidence produced as part of those agreements also is being used in a criminal probe of alleged manipulation of ISDAfix, a benchmark used to set rates for trillions of dollars of financial products, according to a person with knowledge of the matter.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE