Banks are racing to betray their competitors to avoid possible European Union (EU) fines for rigging foreign-exchange markets, according to a person with knowledge of the EU's preliminary investigation.

Lenders are vying to emulate UBS AG and Barclays Plc, which dodged penalties of about 3.2 billion euros ($4.4 billion) for blowing the whistle on manipulation of interest-rate benchmarks, said the person who asked not to be named because the EU process is private. More banks have volunteered information on currency markets than for the probes into Libor and Euribor rigging, the person said.

With penalties forgiven for the first to snitch and discounts of as much as 50 percent for the next in line, banks have an incentive to win the race to EU Competition Commissioner Joaquin Almunia's door. This year's total for EU price-fixing fines is almost 1.88 billion euros—about half the waived penalties for companies that first blew the whistle in cartel cases.