Photographer: Simon Dawson/Bloomberg

Barclays, JPMorgan, Citi Help U.S. Broaden Currency Probe

Updated on
  • Prosecutors disclose potential new conspiracy in market
  • U.S. says 2015 currency fines reflect bank cooperation

Barclays Plc didn’t close the book on allegations of currency rigging with last year’s guilty plea: Since then, the bank has reviewed more than 2.4 million documents and 100,000 audio calls about its foreign-exchange practices and interviewed dozens of current and ex-employees.

Now the U.S. government is using information from Barclays and two other banks, JPMorgan Chase & Co. and Citigroup Inc., to broaden its long-running investigation into the manipulation of foreign-currency markets. 

The three banks have cooperated to provide evidence of a potential new antitrust conspiracy in the currency spot market that prosecutors say involves different currencies than the ones at the center of their 2015 guilty pleas, according to court papers filed by the government and the banks in advance of sentencings scheduled for Thursday.

Officials at the three banks and a Justice Department spokesman declined to comment.

The disclosure shows the Justice Department isn’t finished with its examination of global financial markets for collusion after years-long investigations into currency trading and interest-rate benchmarks that have resulted in about $4.5 billion in criminal penalties. It also speaks to the mass of investigatory evidence that Attorney General Loretta Lynch’s department will pass on to her successor under President-elect Donald Trump.

“The United States has an ongoing investigation into this conduct, which the defendant has significantly advanced through its cooperation,” prosecutors said about Barclays’s assistance in a Dec. 1 court filing.

Lower Penalties

U.S. prosecutors cite the cooperation as one of the reasons why the banks, at their Dec. 15 sentencing, should receive penalties that are lower than the fines called for under federal guidelines.

For Barclays, the government is requesting a nearly 50 percent reduction from the $1.2 billion penalty. Prosecutors asked U.S. District Judge Stefan Underhill in their Dec. 1 filing to approve a $650 million penalty.

Citigroup’s penalty under the guidelines would be $1.4 billion and JPMorgan’s would be $846 million. The Justice Department, however, said Citigroup should pay $925 million and JPMorgan should pay $550 million -- the amounts agreed to when the resolutions were announced in May 2015.

Guilty Pleas

The three banks, along with the Royal Bank of Scotland Group Plc, pleaded guilty on May 20, 2015, to conspiring with each other and UBS Group AG to manipulate currency transactions by coordinating trades. UBS, which received immunity from charges in the currency case, pleaded guilty for rigging benchmark interest rates after violating the terms of an earlier resolution. RBS and UBS declined to comment.

RBS, which is also scheduled to be sentenced on Thursday, agreed to pay a $395 million penalty, while the guidelines call for a $528 million fine. Like the other banks in the case, prosecutors are asking for the lower amount, citing RBS’s "substantial assistance" which helped the government enter into "swift" resolutions with the other banks.

Prosecutors haven’t said whether RBS or UBS are involved in the ongoing investigation.

Under Probation

Upon sentencing, four of the banks will begin three-year probation periods requiring them to report any potential misconduct or investigations by authorities. UBS will be under slightly different probation terms.

JPMorgan and Citigroup provided documents, audio files and trading data to the Justice Department for the new investigation. They also identified relevant evidence and conducted factual presentations for the government, prosecutors said. Barclays has done all that, as well as obtaining information from witnesses.

Barclays has brought the government’s attention to conduct that otherwise would have been difficult to find, according to the Justice Department. Thus far, the bank has disclosed conduct in nine separate instances, according to its filing.

The documents contain little information as to whether the banks’ cooperation is helping prosecutors build cases against the small group of traders at the heart of the conspiracy. Prosecutors have previously said traders at the five banks used an instant messaging group called The Cartel to fix prices.

Thus far, no individuals have been charged in the investigation, though people familiar with the matter have said charges are still being pursued.

While the court filings don’t provide details of the new investigation, Bloomberg reported in January that prosecutors were looking into whether banks conspired to fix prices quoted to clients for buying and selling currencies, known as a bid-ask spread.

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