The Justice Department has not charged Goldman in relation to the state-owned fund, 1Malaysia Development Berhad, known as 1MDB. Goldman, which is being investigated by Malaysian authorities and the Justice Department for its role in bond sales for the fund, has said it has not had settlement talks.

A criminal guilty plea, considered one of the harshest penalties the Justice Department can impose on a company, could potentially expose Goldman to litigation from private parties and result in restrictions on its business, depending on the final terms of any settlement.

The Justice Department announced criminal charges against two former Goldman bankers tied to the scandal involving 1MDB, Tim Leissner and Roger Ng, last year. Goldman has consistently tried to distance itself from the scandal, saying the criminal activities of Leissner and Ng were hidden from the bank's management.

Goldman Sachs spokesman Jake Siewert said in statement on Wednesday the bank does not believe "a charge would be warranted by the facts of the case or the law, particularly because senior management was unaware of the criminal activity by Mr. Leissner and his associate who took extraordinary efforts to hide their part in the illegal scheme from management, compliance, and legal functions at the firm." Without a charge, no settlement would be necessary.

The staff recommendation by prosecutors is now being considered by senior officials at the Justice Department, the FT said, citing people familiar with the matter.

The Justice Department declined to comment.

Goldman's shares closed down 1.8 percent on Wednesday.

The Justice Department does not typically pursue criminal guilty pleas from corporations. In recent years it has tended to negotiate non-prosecution or deferred prosecution agreements that are generally considered to be less damaging to companies.

Banks with criminal convictions can lose access to certain government perks, including a streamlined process to raise funds through securities offerings and the ability to manage American pension funds. They could also have a range of other critical licenses revoked by other regulatory agencies.

In the past, however, the DOJ has ensured that the relevant government regulators would grant waivers that would allow a bank to continue doing such business out of concern that a dramatic upheaval of a major firm could have a negatively affect markets.

In 2015, four large banks – Citicorp, JPMorgan Chase & Co, Barclays PLC and The Royal Bank of Scotland PLC – pleaded guilty to felony charges of trying to manipulate foreign exchange rates. UBS AG pleaded guilty to manipulating benchmark interest rates at the same time. Barclays, Citi, JPM and UBS all received certain waivers.

But such a policy has been under political pressure from Democrats – including Representative Maxine Waters, who now chairs the House of Representative’s banking committee, and Senator Elizabeth Warren, a candidate for the Democratic nomination for president who argue that banks that plead guilty should suffer consequences.

Analysts focused on Goldman had expected the bank to enter into a deferred prosecution agreement, possibly including an admission of wrongdoing. They downplayed the risks to the bank’s business, pointing to the limited overall impact such pleas had had on foreign banks.

"A guilty plea would not be 'game over,' in our view," Mike Mayo, senior analyst at Wells Fargo Securities, wrote in a note on Wednesday. "There's little chance that [Goldman Sachs] would agree to a guilty plea without waivers from government agencies that would allow them to continue to conduct regular business, albeit with better controls."

According to prosecutors, Goldman generated about $600 million in fees for its work with 1MDB, which included three bond offerings in 2012 and 2013 that raised $6.5 billion. Leissner, Ng and others received large bonuses in connection with that revenue.

Prosecutors described the bank's system of internal accounting controls as "easily circumvented" and said its culture in Southeast Asia was "highly focused on consummating deals, at times prioritising this goal ahead of the proper operation of its compliance functions."

The government of former Malaysian Prime Minister Najib Razak set up the 1MDB fund in 2009. The U.S. Justice Department estimated that $4.5 billion was misappropriated by high-level fund officials and their associates between 2009 and 2014.

(Reporting by Elizabeth Dilts in New York and Peter Schroeder in Washington; Additional reporting by Michelle Price and Matt Scuffham; editing by Cynthia Ostermanand Leslie Adler)

By Elizabeth Dilts and Pete Schroeder