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Citigroup agrees US$5.4m fine to settle rand collusion

Tuesday, February 21, 2017 - 18:15

29400759 - 25_09_2013 - citi26.jpg
Citigroup Inc agreed to pay a penalty of almost 70 million rand (S$7.659 million) to settle a South African antitrust investigation that said the US bank participated in an alleged cartel to manipulate the value of the rand.

[Johannesburg] Citigroup Inc agreed to pay a penalty of almost 70 million rand (S$7.659 million) to settle a South African antitrust investigation that said the US bank participated in an alleged cartel to manipulate the value of the rand.

Citigroup will make available witnesses to help prosecute other banks that participated in price fixing and market allocation in the trading of foreign-currency pairs involving the rand, the Pretoria-based commission said in an e-mailed statement on Monday.

The agreement "was done to encourage speedy settlement and full disclosure to strengthen the evidence for prosecution of the other banks," Commissioner Tembinkosi Bonakele said in the statement.

The South African probe is the latest investigation into alleged rigging by the world's biggest banks of the US$5.1 trillion-a-day market for products tied to foreign exchange, which has resulted in more than US$10 billion of penalties since Bloomberg first revealed manipulation in 2013. 

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Former Citigroup trader Christopher Cummins and ex-BNP Paribas SA employee Jason Katz have pleaded guilty to allegations in the US for rigging emerging-market currencies. Both were identified in the Competition Commission investigation.

"There could well be other settlements now that it seems the parties are prepared to come forward," Patrice Rassou, head of equities at Sanlam Investment Management in Cape Town, said in an e-mailed response to questions on Monday.

"Citi is pleased that the matter has been settled," the bank said in an e-mailed statement.

"We will continue building upon the changes that we have already made to our systems, controls, and monitoring processes."

Barclays Plc and its units that have been named in the investigation may get the same sort of deal as Citigroup from South African antitrust authorities.

It won't be targeted for prosecution because the UK bank co-operated with regulators, three people familiar with the matter said last week. Citigroup and Barclays were both named as part of the rand-rigging probe when it first started in 2015.

Barclays Africa Group Ltd, the UK bank's South African unit, has been granted conditional immunity from prosecution in return for its continued cooperation in the rand-rigging investigation, Reuters reported on Tuesday, citing Mr Bonakele.

The commission, which investigates cases, on Feb 15 referred the matter to the country's Competition Tribunal, which will hold hearings before deciding what penalties should be imposed.

The commission said that Bank of America Merrill Lynch, HSBC Holdings Plc, BNP Paribas SA, Credit Suisse Group AG, JPMorgan Chase & Co, Nomura International Plc, Commerzbank AG, Macquarie Group Ltd, Australia & New Zealand Banking Group Ltd, Investec Ltd, Standard Chartered Plc and Standard Bank Group Ltd should be fined.

The administrative penalty paid by Citigroup does not exceed 10 per cent of the lender's annual turnover, the commission said. While the commission recommended the banks be fined 10 per cent of their turnover, the maximum allowed, the tribunal will determine the penalty based on "affected revenue" from their foreign exchange units and the period over which the transgressions took place, Simon Roberts, a director of the University of Johannesburg's Centre for Competition, Regulation and Economic Development, said last week.

"Telling on mates and getting away easy is always a tough one, but it does promote whistle blowing," Simon Brown, Johannesburg-based chief executive officer of trading company JustOneLap, said by e-mail.

"The fine does seem small. We will probably see other banks settle, especially the local banks. If for nothing else, they will settle to remove the pressure."

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