U.S. official: Repeat offender banks could face harsh punishment

Reuters

By Aruna Viswanatha

WASHINGTON, Nov 18 (Reuters) - A top U.S. Justice Departmentofficial said on Monday that the department will give noleniency to financial institutions that repeatedly break thelaw, in a sign that banks under investigation for possiblecurrency manipulation could face harsh punishment.

"When we see repeat players such as banks that previouslyentered into non-prosecution agreements or deferred prosecutionagreements, and yet are under scrutiny again for otherviolations, we will have no choice but to consider all of thepossible actions at our disposal," Deputy Attorney General JamesCole said during an anti-money laundering conference inWashington.

Some of the world's biggest banks, including Barclays Plc , UBS AG and Royal Bank ofScotland Group Plc , have already paid billions ofdollars in penalties and entered into such agreements to resolvecharges that their traders worked to manipulate the Liborbenchmark and other interest rates to favor their own positions.

Others banks, including Deutsche Bank AG and JPMorgan Chase & Co., remain under investigation oversimilar allegations.

Many of those same institutions, including Barclays, UBS,and JPMorgan, have benched traders in response to a second majorinvestigation by regulators in the United States, Europe andAsia into whether other traders also sought to manipulatebenchmark foreign-exchange rates.

When banks uncover one problem, Cole said, the governmentexpects them to thoroughly review other offices and businessunits to seek out similar problems in other areas.

"We've seen this pattern at a number of financialinstitutions," Cole said.

"What it tells us is that even if the specific conductdidn't directly involve senior management, the repetition speaksvolumes about the culture senior management has created," saidCole, the No. 2 official at the Justice Department.

"When we see criminal violations in multiple business unitsor locations, we will hold banks accountable," he said.

The Justice Department has come under fire in recent yearsfor the lack of big cases against Wall Street executives overthe conduct that fueled the 2007-2009 financial crisis.

It has since brought a steady stream of cases againstfinancial institutions over Libor manipulation.

The Justice Department acknowledged publicly for the firsttime late last month that it has an "active ongoinginvestigation" into foreign-exchange rate manipulation.

Last week, Attorney General Eric Holder said themanipulation that prosecutors have uncovered so far "may just bethe tip of the iceberg."

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