Citigroup Inc Unit Targeted For Guilty Plea In Currency Probe

Two people briefed on the matter have spoken out on condition of anonymity, and claim that Citigroup┬ámade a counter-offer that the guilty plea would come from a smaller subsidiary. According to one source the matter may be settled as soon as May and the related fine probably won’t be more than $1 billion, write Dakin Campbell, Tom Schoenberg and Hugh Son for Bloomberg.

Citigroup Inc Unit Targeted For Guilty Plea In Currency Probe

Pressure to plead guilty

However two other sources claim that the Justice Department has not yet decided to target one particular Citigroup entity. The consequences of a guilty plea by its main banking unit could be grave, threatening Citigroup’s ability to conduct certain kinds of business through that subsidiary, a big blow considering that the unit was responsible for over 70% of the firm’s revenue last year.

The Justice Department probe into the rigging of currency markets has been underway for nearly two years, and now officials are pushing for settlements which include guilty pleas. Banks are understandably trying to make guilty pleas from smaller subsidiaries rather than their main units, while prosecutors are holding out for the bigger fish.

If a guilty plea is received it would mark a big step for criminal enforcement in the financial industry. Although fines have previously been paid by JPMorgan and Citigroup, neither has actually been convicted of a crime in the U.S.. It is thought that settlements will be reached with both firms at the same time as at least three other banks.

Potential impact on operations

Settlements are expected to be around $1 billion for all of the banks, while those that are convicted of crimes will be disqualified from certain activities, including private placements and retirement fund management, unless they receive waivers from the SEC and the Labor Department. Any guilty pleas are likely to be dependent on assurances that these waivers will be granted, according to sources.

Banks had successfully avoided harsher punishment in the wake of the financial crisis by arguing that criminal convictions could impact operations and damage the recovery of the global economy. The precedent was set with the punishments handed out to foreign banks such as Credit Suisse, but the regulatory hurdles are higher for domestic banks like Citigroup.