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    Royal Bank of Scotland will pay $612 million in rate-rigging case

    LONDON — A campaign to root out financial fraud secured a victory Wednesday as authorities took aim at Royal Bank of Scotland for its role in an interest rate manipulation scheme that has emboldened prosecutors and consumed the banking industry.

    US and British authorities struck a combined $612 million settlement with the bank, the latest case in a global investigation of rate-rigging. The Justice Department dealt another blow to the bank, forcing its Japanese unit to plead guilty to criminal wrongdoing.

    The penalty for the subsidiary, a hub of rate manipulation, underscores a shift in the way federal authorities punish financial wrongdoing. The RBS case echoed an earlier action against a UBS subsidiary, which pleaded guilty to felony wire fraud as part of a larger settlement. These cases represent the first units of a big bank to agree to criminal charges in more than a decade.


    “I want financial institutions to know that this department will absolutely hold them to account,’’ said Lanny Breuer, head of the Justice Department’s criminal division.

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    The investigation could drag on for years. Authorities suspect more than a dozen banks falsified reports to influence benchmarks like the London Interbank Offered Rate, or Libor, which underpins the costs for trillions of dollars in financial products like mortgages and credit cards.

    A person involved in the investigation indicated the first banks to settle were among the worst actors. But they got a ‘‘discount’’ for their cooperation, said people with knowledge of the matter. That raises the prospect the remaining banks could face high-priced settlements. Deutsche Bank is expected to settle in late 2013, several people said. But the bank is not in formal settlement talks and is not prepared to resolve the case, they said.

    Foreign banks have borne the brunt of the scrutiny, but Citigroup and JPMorgan Chase are under investigation by the Commodity Futures Trading Commission, the US regulator leading the case.

    Some bank executives are pushing for a broad deal encompassing multiple institutions. But authorities are balking at a ‘‘global settlement,’’ people involved in the case say.


    As regulators continue to pursue actions, prosecutors are planning charges against traders. The first charges came last year, when the Justice Department filed actions against two former UBS traders.

    The case has centered on how much banks charge each other for loans. Such figures form the basis of Libor and other rates. Government complaints have outlined a scheme in which banks reported false rates to lift trading profits.

    In the first Libor case, in June, authorities got a $450 million settlement with Barclays. In December, UBS agreed to a record $1.5 billion settlement. Royal Bank of Scotland, owner of Citizens Financial Group in the United States, had aimed to avert the guilty plea for its Japanese subsidiary, people involved in the case said. But the Justice Department wouldn’t back down.

    The $612 million is the second-largest penalty in the investigation. Royal Bank of Scotland, majority-owned by the British government after a bailout, has put aside $2.7 billion to compensate customers inappropriately sold loan insurance. On Wednesday, it unveiled plans to claw back bonuses to help fund the settlement.