Five of the world's biggest banks will plead guilty to criminal charges and pay more than $5 billion in fines after federal investigators found their traders had been rigging the foreign currency market for years.
JPMorgan Chase, Citigroup, Barclays, Royal Bank of Scotland and UBS were all implicated. Prosecutors say traders at these institutions used private online chat rooms — they called themselves "The Cartel" — to coordinate currency prices and effectively steal from clients on the other side of their trades. The scheme ran from at least 2007 through 2013.
The Justice Department called it brazen. "They used a lot of cheating," said Attorney General Loretta Lynch at the announcement. That's a pretty blunt summary from the nation's top law enforcement officer.
For businesses in Hawaii, the story hits closer to home than it might seem. The forex market sets the exchange rates that determine what it costs to import goods, what Japanese tourists get for their yen, and what mainland companies pay when doing business with international partners. When those rates are manipulated even slightly, the effects ripple outward.
UBS got a slightly different deal — guilty to wire fraud rather than the currency charge — because the bank had already burned through an earlier immunity agreement by continuing the same behavior it had promised to stop.
The fines go to the Justice Department, the Federal Reserve, and state banking regulators. The banks also agreed to stronger internal compliance programs and are required to self-report violations going forward. Whether that actually changes the culture on trading floors remains to be seen.