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RISK: Five banks to plead guilty to rigging world currency market | Canadian Insurance
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RISK: Five banks to plead guilty to rigging world currency market

Traders allegedly shared customer orders through chat rooms

Five global banks will plead guilty to rigging the world’s currency market, the first time in more than two decades that major players in the financial industry have admitted to criminal wrongdoing. The banks will also pay more than $5 billion in penalties.

JP Morgan Chase, Citigroup, Barclays and The Royal Bank of Scotland conspired with one another to fix rates on U.S. dollars and euros traded in the huge global market for currencies, according to a resolution announced Wednesday between the banks and the Department of Justice.

A group of currency traders, who called themselves “The Cartel,” allegedly shared customer orders through chat rooms and used that information to profit at the expense of their clients.

The four banks will pay a combined $2.5 billion in criminal penalties to the DOJ for criminal manipulation of currency rates between December 2007 and January 2013, according to the agreement. The Federal Reserve is slapping them with an additional $1.6 billion in fines, as the banks’ chief regulator. Finally, British bank Barclays is paying an additional $1.3 billion to British and U.S. regulators for its role in the scheme.

Another bank, Switzerland’s UBS, has agreed to plead guilty to manipulating key interest rates and will pay a separate criminal penalty of $203 million.

The agreement between the banks and the DOJ is subject to court approval. If approved, all five banks have agreed to three years of corporate probation overseen by a court. The banks will also help prosecutors with their investigations into individual criminal activity related to the currency market rigging.