DOJ Launches Criminal Probe Into JPMorgan, Citigroup Foreign Exchange Business

The U.S. Department of Justice has begun a criminal probe into the foreign exchange businesses of JPMorgan Chase (JPM) and Citigroup (C). The investigations come in the wake of allegations that banks in the United States and abroad manipulated key reference rates in the foreign exchange currency markets.

On Monday, JPMorgan disclosed the criminal investigation in a regulatory filing. Noting that other regulators, including the U.S. Commodity Futures Trading Commission and UK’s Financial Conduct Authority are conducting civil probes, the firm estimated that current legal proceedings could reach $5.9 billion.

Last week, Citigroup announced that it too was facing a criminal probe over foreign currency trades and controls. The bank is also dealing with inquiries from regulators. Citigroup said it has put aside $600 million in legal provisions over what had been budgeted for the third quarter.

In the wake of foreign exchange rigging allegations, over 25 traders from different firms have been put on leave, suspended, or fired. Regulators in the U.S. and the Financial Conduct Authority are coordinating efforts to settle some of the investigations. Other banks under investigation over possible interest rate manipulation include UBS (UBS), Royal Bank of Scotland (RBS), Barclays (BSC) and Deutsche Bank (DB).

Meantime, HSBC Holdings PLc (HSBA) reported lower-than-estimated profits for the third quarter after putting aside over $1 billion for the probe into possible currency market rigging, as well as for customer compensation. Europe’s largest bank recently took a $550 million charge to settle claims of misconduct related to mortgage securities sales from prior to the financial crisis.

JPMorgan facing criminal probe over currency trades, CNN Money, November 4, 2014

Big Banks Brace for Penalties in Probes, The Wall Street Journal, October 30, 2014

HSBC Misses Estimates, Takes $378 Million Currency Charge, Bloomberg, November 3, 2014

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