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

Aruna Viswanatha
Monday, 18 Nov 2013 | 10:38 AM ET

WASHINGTON, Nov 18 (Reuters) - A top U.S. Justice Department official said on Monday that the department will give no leniency to financial institutions that repeatedly break the law, in a sign that banks under investigation for possible currency manipulation could face harsh punishment.

"When we see repeat players such as banks that previously entered into non-prosecution agreements or deferred prosecution agreements, and yet are under scrutiny again for other violations, we will have no choice but to consider all of the possible actions at our disposal," Deputy Attorney General James Cole said during an anti-money laundering conference in Washington.

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

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

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

When banks uncover one problem, Cole said, the government expects them to thoroughly review other offices and business units to seek out similar problems in other areas.

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

"What it tells us is that even if the specific conduct didn't directly involve senior management, the repetition speaks volumes about the culture senior management has created," said Cole, the No. 2 official at the Justice Department.

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

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

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

The Justice Department acknowledged publicly for the first time late last month that it has an "active ongoing investigation" into foreign-exchange rate manipulation.

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

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