South Africa: Citigroup Agrees $5.4 Million Fine to Settle Rand Collusion

Feb 22, 2017

Citigroup Inc. agreed to pay a penalty of almost 70 million rand ($5.4 million) to settle a South African antitrust investigation that said it participated in an alleged cartel to manipulate the value of the rand.

Citigroup will make witnesses available 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.

The South African probe is the latest investigation into alleged rigging by the world’s biggest banks of the $5.1 trillion-a-day market for products tied to foreign exchange, which has resulted in more than $10 billion of penalties since Bloomberg first revealed manipulation in 2013. Former Citigroup trader Christopher Cummins and ex-BNP Paribas SA employee Jason Katz have pleaded guilty to allegations in the U.S. 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.

‘Monitoring Processes’

“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 were 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 U.K. 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 started in 2015.

Barclays Africa Group Ltd., the U.K. bank’s South African unit, has been granted conditional immunity from prosecution in return for its continued cooperation in the rand-rigging investigation, Bonakele said in an interview in Cape Town on Tuesday. “I expect more banks to pay admission of guilt fines and to cooperate with the investigation as they seek to avoid reputational damage. The culture and the morality of trading by local and international banks has to change.”

‘Affected Revenue’

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 percent of the lender’s annual turnover, the commission said. While the commission recommended the banks be fined 10 percent 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.”


Source: Bloomberg

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