DOCSLIB.ORG

Theres a New Sheriff in Town Global Regulatory Enforcement After LIBOR

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Theres a New Sheriff in Town Global Regulatory Enforcement After LIBOR BANKING & PROJECT FINANCE ENFORCEMENT confidence in the integrity of the BBA Libor setting process and the accuracy of the There’s a new figures it produces’, journalists at Bloomberg and the WSJ were highlighting the issue. Regulators, notably the US Commodities Futures Trading Commission (CFTC) were sheriff in town to start investigating shortly thereafter. That investigation was to have something of a The Libor scandal fundamentally changed global long lead time, however, because it was not until 2012 that the reach and scale of the regulatory enforcement. Today, institutions are investigation were to become widely increasingly being deputised to police themselves publicised. On June 27 2012, Barclays received the raditionally, when a new sheriff rides were perceived to have been insufficiently then largest-ever fine imposed by the FSA of into town, the place is in a mess. aggressive in pursuing enforcement options £59.5 million ($87.7 million), as part of a T Society has broken down, lawlessness in the lead up to and during the financial settlement with US and UK regulators for abounds and right-thinking people avoid the crisis. In December 2008, the Madoff $453 million. Barclays also lost its chief streets. The saloon bars are full of rowdy, scandal would raise questions about whether executive, Bob Diamond. The Barclays fine intimidating gunslingers who go the Securities and Exchange Commission was soon eclipsed by the new largest-ever unchallenged – other than by fellow (SEC) had been overly light touch in its FSA fine meted out to UBS on December gunslingers. The town badly needs approach. In March 2009, Hector Sants, 19 2012, as part of a $1.5 billion settlement redemption (as does the sheriff, on then chief executive of the UK Financial with UK, US and Swiss regulators. Two occasion). The townspeople bestow a clear Services Authority (FSA), felt compelled to months later, on February 6 2013, RBS was mandate for change on their new law officer. announce the end of light touch regulation fined £87.5 million as part of a global He in turn enlists the support of deputies to by the regulator, with his memorable settlement of $612 million. In late 2013, clean the place up. Vigorous law declaration: “People should be very Rabobank was fined $1.07 billion. In July enforcement takes centre stage. frightened of the FSA”. 2014, Lloyds Bank was fined $370 million. This approach seems to have been Most significantly for the future, Libor Just over a year later, on November 11 adopted by regulators in the wake of the marked a paradigm shift in the nature, 2014, the Financial Conduct Authority Libor [London Interbank Offered Rate] international scope and intrusiveness of (FCA) imposed fines totalling £1.1 billion scandal. In the post-Libor world, they have regulatory enforcement activity. Both in on five banks, for failing to control business effectively deputised firms to pursue their practice, and as a matter of law, institutions practices and maintain proper systems and enforcement objectives. A combination of are increasingly being deputised by the controls in the banks’ foreign exchange (FX) structural changes to law and regulation, sheriff to police themselves across the world, trading activities between 2008 and 2013. and the practicalities surrounding identify responsible individuals for future Quite apart from their eye-watering size, international regulatory investigations, have enforcement purposes, attest to controls, these fines and the subsequent legislative led to the internalisation of enforcement and disprove guilt (as opposed to defending follow-up changed the enforcement type activity within firms. innocence) when a problem arises. landscape altogether. The result is a once-in-a-generation The tipping point imperative on senior business, compliance Lessons for enforcers and the The Libor scandal represented a tipping and legal management to implement not enforced point in the evolution of modern regulatory only major systems and controls changes, A number of key lessons have emerged from enforcement. It exhibited Malcolm but fundamental cultural change, before the that dramatic period. Gladwell’s three characteristics: next big scandal. Institutions will have to be contagiousness; the fact that otherwise able to demonstrate that they can police the Libor as the first global investigation – limited causes or incidents can have big town vigorously, including finding and opportunities and challenges effects; and the fact that change happens not shooting the gunslingers, if they are not to Libor became the first truly global financial gradually but in one dramatic moment or be in the sheriff’s sights themselves. investigation, despite its initially limited period. scope. At its height, Libor or related Libor was the touchpaper that led to an Libor: origins and outcomes benchmarks were being investigated by at least explosion of public and political outrage at Libor was a child born of the financial crisis. 12 regulators around the world. These the financial services industry that had In April 2008, bank analysts issued a included financial and competition regulators previously found some expression in the research note concluding that ‘the current in the US (CFTC, SEC, Department of wake of the financial crisis, but had still liquidity crisis has damaged the interbank Justice (DoJ)), the UK (FCA and Serious remained somewhat latent. That explosion market, resulting in Libor sets that at times Fraud Office), Germany (BaFin), Switzerland led not only to new laws and regulations, deviate significantly from real interbank (Swiss Comco), the European Commission, but more fundamentally to a renewed lending rates’. It also stated, rather Korea Fair Trade Commission, Hong Kong empowerment of global regulators. prophetically, that if Libor lost credibility Monetary Authority, Monetary Authority of Further empowered, the regulators have ‘the long-term psychological and economic Singapore and Japan Financial Services generated significant momentum in re- impacts this could have on the financial Agency. The FX investigation was to follow balancing their relationships with firms. In markets are incalculable’. suit in a very similar fashion. certain cases, this involved a rehabilitation of By May 2008, despite the British Bankers This profusion of international overseers the regulators themselves, some of whom Association’s (BBA) expression of ‘every presented firms and regulators with a novel, 64 IFLR/April 2015 www.iflr.com ENFORCEMENT complex, and not always harmonious firms. Far from it. The deputisation was A further issue when a firm is deputised in relationship dynamic. designed to supplement, not supplant, this way is the lack of clarity as to parallel On the face of it, answering questions or regulators’ efforts. This was explained by lines of communication between regulators, providing information to multiple regulators principle deputy assistant attorney general and the risks to which this gives rise. While might have given rise to logistical issues in Marshall Miller of the DoJ in a speech at the the UK, US, Swiss and other regulators will the past, but these were relatively easily GIR Programme in New York on September proudly announce their close cross-border navigable. A US regulator seeking 17 2014: cooperation at the time of settlements, it is information from a UK firm would “Some years ago there was a perception that rare in practice to obtain any real insight generally make a request for documents the Justice Department outsourced into levels of collaboration, including what through the international cooperation investigations of corporate criminal conduct to is or is not being shared during the course of section of the FCA. The UK regulator private law firms then sat back and waited for an investigation, prior to the settlement. would duly pass on the request in the form presentations and memos and hot docs to roll It can be dangerous to make any of a Notice of Requirement to the firm, in. At the Criminal Division, nothing could be assumptions in this context, for example exercising statutory powers of compulsion further from the truth”. that regulators are discussing matters at that disposed of Data Protection Act issues Miller was emphatic, as any fellow regulatory colleges or will generally pass on while requiring production. regulator would be, that while the DoJ material information in a timely and By contrast, following the spaghetti-like strongly encourages cooperation and firms comprehensive manner as between trail of global business lines and to carry out their own investigations, these themselves. Reasonable as it may be, if that responsibilities, employees moving from are just one of the many tools that are used assumption proves wrong, and the country to country with their work, and the to further investigations. They do not rely regulators perceive a failure of openness or other cross-border aspects of Libor gave rise on the internal investigation to make their cooperation by the firm in providing such to difficult – and occasionally delicate – case. information under principle 11 of the problems for regulators and firms alike. FCA’s Principles for Businesses in the UK, In the context of their international reach, A bobby on the beat or its equivalent elsewhere, the Libor highlighted the limitations on the Similarly, and echoing comments made by consequences can be severe. Goldman territorial jurisdiction of regulators. Given FCA Enforcement in December 2014, Sachs found this out when it was fined their own statutory and other restrictions, Andrew Ceresney, director of the SEC’s £17.5 million in September 2010 by the not to mention comity and sovereign Enforcement Division, made the point at a FSA for breach of principle 11, among authority issues with other regulators, they Corporate Governance conference on others, for its failure to keep the FSA could not simply march into another February 10 2015: “It is obviously an active informed of material developments in a country to follow the trail inevitably laid by regulatory atmosphere, we think it is non-Libor SEC investigation.
Load more

Recommended publications
  • Assigning Responsibilities in the Libor Scandal
    1233 The Differential Management of Financial Illegalisms: Assigning Responsibilities in the Libor Scandal Thomas Angeletti How, in a context of growing critiques of financialization, can law contribute to protecting the legitimacy of finance? This paper argues that the assign- ment of responsibilities between individuals and organizations plays a deci- sive role, using the recent Libor scandal as an empirical illustration. To do so, the paper offers a Foucauldian framework, the differential management of financial illegalisms, dedicated to the study of illegalities in financial capi- talism. The comparison of the legal treatment of two manipulations of Libor, this key benchmark in financial markets, reveals how mid-level traders have been the object of criminal prosecution, while law undervalued the role of top managers and organizations. To capture how differential management is performed in practice, I analyze precisely how the conflict-resolution devices (criminal trial vs. settlement) and the social categorizations prevailing in the two manipulations of Libor favor different forms of responsibility, individual or organizational. I conclude by exploring the implications of law’s relation- ship to financial legitimacy. For more than a decade now, the financialization of capitalism (Krippner 2011; Van der Zwan 2014) has been the locus of many critiques. Financialization has been studied sufficiently to under- stand how much finance has invaded our daily lives (Martin 2002), without measuring necessarily fully its ramifications. The clear causality between the rise of wages in the financial sector and the rise in income inequality in the United Kingdom (Bell and Van Reenen 2013), the United States (Volscho and Kelly 2012), and France (Godechot 2012) has put the financial sector on the spot.
    [Show full text]
  • A LIBOR Scandal Primer What Does the Acronym
    A LIBOR Scandal Primer What does the acronym, “LIBOR,” stand for? The “London Inter-bank Offered Rate.” What does LIBOR represent? LIBOR is promoted as representing the average interest rate that large banks can borrow from one another. LIBOR is not the interest rate on any single loan. Rather it is an index intended to reflect average interbank interest rates as determined by a defined procedure. LIBOR is not a single interest rate, but is approximately 150 interest rates. • There is a separate set of interest rates for each major currency. LIBOR rates, representing the cost of acquiring funds for a time period, are unique for each currency because relative currency values differ over time. For example, the value in euros of one US dollar changes continuously. The difference in euro LIBOR rates and US dollar rates brings borrowings in the two currencies into equilibrium. • Within each set of LIBOR rates for a given currency, there are different rates for different durations (the term of a fixed period of interest rate). For instance, one day LIBOR represents a loan with an interest rate which is reset (or is repaid) every day. Three-month LIBOR represents a loan with an interest rate that is reset (or is repaid) every three months, and so on. Why is the cost of inter-bank borrowing important to banks? When banks lend money to individuals, companies or governments, the fundamental cost of lending the money is the cost of acquiring the funds to lend. On the margin, the cost of acquiring funds is the interest rate needed to procure funds from another bank.
    [Show full text]
  • The LIBOR Scandal What We Know, What We Don’T, and What to Expect 8/2/2012
    REPUBLICAN STAFF BRIEF The LIBOR Scandal What We Know, What We Don’t, and What to Expect 8/2/2012 Key Points LIBOR is important because it is referenced by nearly $800 trillion in global financial instruments, including corporate debt, mortgages, student loans, interest rate swaps, and other derivatives. Although Barclays is the only bank to have been singled out for manipulating LIBOR so far, more than a dozen other large domestic and foreign banks are being investigated by regulators. The net effect of Barclays’ manipulations of LIBOR is yet unclear—the bank’s counterparties likely benefitted in some instances and likely suffered harm in others, while individual consumers might have benefitted on the whole. Years of litigation will determine the full extent of the damages. Were Glass-Steagall still law, none of its provisions would have applied in this case. Rather than enact new laws or implement new regulations, the federal government should efficiently and effectively enforce the existing antitrust and securities laws that already made Barclays’ and its employees’ actions illegal. Combining proper enforcement of existing laws with smart reforms to internal and external LIBOR reporting processes will prevent further manipulation of this important benchmark interest rate. Introduction On June 27, 2012, representatives of the British bank Barclays agreed to On June 27, 2012, pay a $453 million fine to U.S. and U.K. regulators to settle allegations representatives of the that Barclays manipulated the London Interbank Offered Rate (LIBOR). British bank Barclays LIBOR is a set of indices that represent the prevailing interest rates in agreed to pay a $453 London money markets.
    [Show full text]
  • The Good Banker1
    The Good Banker1 Patrick Bolton Columbia University, ECGI, CEPR and NBER Second Draft: November 4, 2013 ABSTRACT What is a good banker? What is the economic value added of banks? The economics literature on financial intermediation focuses on the role of banks as deposit-taking institutions and as delegated monitors of borrowers. But this description barely begins to represent what banks do in a modern economy. Besides commercial lending, large banks are engaged in a number of other activities ranging from cash management, trade credit, swaps and derivatives trading and underwriting of securities. In recent decades banks have increasingly relied on fee income generated from their activities other than lending. The financial crisis, and the concerns about “too-big-to-fail” banks it has exposed, has led to a re-evaluation of bankers’ speculative practices and of the economic benefits of banks’ non-lending activities. Do trading activities undermine sound banking principles and core lending functions? Do they provide economic benefits, or are they simply an undesirable side-product of deregulation? The main argument of this article is that trading activities are an integral and desirable part of modern banking. These activities enhance banks’ traditional lending role, and regulatory attempts to separate lending and non- lending activities are mostly counterproductive. The main cause of bankers’ reckless behavior is rather to be found in out of hand compensation practices, which exacerbate bankers’ pursuit of short-run profit opportunities at the expense of financial stability and their clients’ interests. 1 I am grateful to Edward Glaeser, Jeffrey Gordon, Ailsa Röell, Charles Sabel, Tano Santos and Glen Weyl for helpful conversations and comments.
    [Show full text]
  • Rebuilding Bank Governance After the Financial Crisis: Best Practices Thomson Reuters CONTENTS
    REBUILDING BANK GOVERNANCE AFTER THE FINANCIAL CRISIS: BEST PRACTICES THOMSON REUTERS CONTENTS WHY BANKS ARE DIFFERENT . 3 ESTABLISHING A FRAMEWORK FOR ASSESSING RISK . 4 FOCUSING ON THE RIGHT DATA REMAINS A CORE CHALLENGE . 5 FINDING THE RIGHT PEOPle – EXPERIENCE IS KEY, BUT NOT THE ONLY ANSWER . 5 A SPOTLIGHT ON EXECUTIVE PAY . 6 CONCLUSION . 7 2 REBUILDING BANK GOVERNANCE AFTER THE FINANCIAL CRISIS: BEST PRACTICES OCTOBER 2012 Demands on bank directors have rarely been There is also a wider array of risks bank higher . Following the financial crisis of 2008, managements and boards must assess in board members in the U .s . and Europe contrast to other industries . These include have confronted dozens of new rules from a credit; market; liquidity; operational; legal and multitude of regulators, while striving to regain reputational risks . At any time, one of these the confidence of customers and shareholders . risks has the potential to jeopardize the bank’s Amidst this newfound scrutiny, bank boards business—making it critical for board members are increasingly being held accountable, with to have timely access to information . regulators as well as private plaintiffs pursuing The regulatory scrutiny to which banks are claims when performance falters . In the first subject, as well as the rising risk of litigation, nine months of 2012, the FDIC authorized suits makes it particularly important for banks to against 274 defendants—although many of be able to point to an effective governance these will ultimately be settled . structure . For example, banks should give The scrutiny shows no sign of abating . Just in careful thought to what percentage of directors the last few months, there has been the Libor are ‘inside’ directors versus independent rate-setting scandal that led to the resignation directors; what the appropriate board of Barclays chief executive, and the unexpected committees are to establish and of course, who trading loss of more than $5 .8 billion at is best equipped to run those committees .
    [Show full text]
  • Debt Market Update: Q1 2015
    Debt Market Update Q1 2015 Edition 23 Corporate Finance KEY THEMES • Australian debt market issuance hiccups… • ASIC’s probe into BBSW setting practices coming to a head but corporate issuance abroad increases • Australian interest rates – more downward trending • Deal of the quarter – APA Group demonstrates and still significant yield curve inversion how to successfully issue off-shore with US$3.7 billion • The ECB launches its quantitative easing programme • Australians issuing off-shore – lots of success • More clarity in developing retail bond market disclosure but beware some finding pricing unresponsive obligations – a new potential source of liquidity In contrast volumes in the AMTN market remain largely unchanged with AUSTRALIAN DEBT MARKET issuance of $3.0 billion only 4 percent down on Q1 2014 and the rolling Q1 2015 saw a material drop in domestic syndicated loan volumes with 12-month average at $17.6 billion close to the previous quarter (see Figure 2). issuance of US$7.0 billion across 20 transactions, a 50 percent drop on Q1 2014 volumes and the fourth lowest quarter in the last 10 years. 12-month Figure 2: Rolling 12m A$ corporate bond market (A$b) rolling average volumes decreased to US$99 billion (see Figure 1). 25 Figure 1: Rolling 12m Australian syndicated loan volume (US$b) 20 125 250 15 100 200 10 75 150 5 50 100 No of deals 0 25 50 1 1 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q1 3Q1 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 0 0 1 1 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q1 3Q1 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 Source: Bloomberg, KPMG Analysis Rolling 12m Volume (LHS) Average Rolling 12m deal size (US$m) Compensating for the reduction in these two markets’ issuance by Source: Thomson Reuters Loan Connector, KPMG Analysis Australians off-shore was materially higher at over US$9.0 billion or more than 3x issuance in Q1 2014 and a near 50 percent increase quarter-by- Three infrastructure transactions dominated – ConnectEast’s $1,035 million quarter (see Figure 3).
    [Show full text]
  • The Libor Scandal: a Need for Revised National and International Reforms and Regulations
    North East Journal of Legal Studies Volume 32 Fall 2014 Article 4 Fall 2014 The Libor Scandal: A Need For Revised National And International Reforms And Regulations Roy J. Girasa [email protected] Richard J. Kraus [email protected] Follow this and additional works at: https://digitalcommons.fairfield.edu/nealsb Recommended Citation Girasa, Roy J. and Kraus, Richard J. (2014) "The Libor Scandal: A Need For Revised National And International Reforms And Regulations," North East Journal of Legal Studies: Vol. 32 , Article 4. Available at: https://digitalcommons.fairfield.edu/nealsb/vol32/iss1/4 This item has been accepted for inclusion in DigitalCommons@Fairfield by an authorized administrator of DigitalCommons@Fairfield. It is brought to you by DigitalCommons@Fairfield with permission from the rights- holder(s) and is protected by copyright and/or related rights. You are free to use this item in any way that is permitted by the copyright and related rights legislation that applies to your use. For other uses, you need to obtain permission from the rights-holder(s) directly, unless additional rights are indicated by a Creative Commons license in the record and/or on the work itself. For more information, please contact [email protected]. 89 / Vol 32 / North East Journal of Legal Studies THE LIBOR SCANDAL: A NEED FOR REVISED NATIONAL AND INTERNATIONAL REFORMS AND REGULATIONS by Roy J. Girasa* Richard J. Kraus** INTRODUCTION Few individuals or even major investors are aware of the London Interbank Offered Rate (LIBOR), a little-known activity that profoundly affects local and world finances. The total value of securities and loans affected by LIBOR is approximately $800 trillion dollars annually.
    [Show full text]
  • I. the LIBOR Scandal A. Introduction the London Interbank Offered Rate
    2 REVIEW OF BANKING & FINANCIALLAW Vol. 32 I. The LIBOR Scandal A. Introduction The London InterBank Offered Rate (“LIBOR”) is a leading financial benchmark, established in 1986, and used for an estimated $300 trillion worth of financial instruments.1 On June 27, 2012, Barclays Bank (“Barclays”) entered into a $360 million settlement with the United States Department of Justice (“DOJ”) and the Commodity Futures Trading Commission (“CFTC”) after Barclays attempted to manipulate LIBOR between 2005 and 2009.2 Further, the United Kingdom’s (“UK”) Financial Services Authority (“FSA”) fined Barclays $92.5 million for its attempted LIBOR manipulation.3 Authorities have since expanded the investigation to include at least fifteen other banks.4 On July 2, 2012, the UK Treasury appointed Martin Wheatley (“Wheatley”), the managing director of the FSA, to review LIBOR and evaluate options for reform.5 On September 28, 2012, Wheatley released his findings in The Wheatley Review (the “Review”) and determined that, although “broken,” LIBOR can be reformed.6 This article outlines the current LIBOR framework, analyzes the Review’s recommended LIBOR reforms, and discusses LIBOR’s 1 Statement of Facts, U.S. Dept. of Justice and Barclays Bank PLC (June 26, 2012) [hereinafter DOJ and Barclays], available at http://www.justice.gov /iso/opa/resources/9312012710173426365941.pdf; Liam Vaughn, Secret Libor Committee Clings to Anonymity Following Scandal, BLOOMBERG (Aug. 21, 2012 8:53 AM), http://www.bloomberg.com/news/print/2012-08- 20/secret-libor-committee-clings-to-anonymity-after-rigging-scandal.html. 2 Derivatives: Barclays to Pay U.S. Authorities $360M to Resolve Allegations in LIBOR Investigation, 99 Banking Rep.
    [Show full text]
  • G:\CDB\Opinions\Motion to Dismiss\Strougo V. Barclays
    Case 1:14-cv-05797-SAS Document 38 Filed 04/24/15 Page 1 of 45 UNITED STATES DISTRICT COURT USDCSDNY SOUTHERN DISTRICT OF NEW YORK DOCUMENT ·------------------------------------------------------------)( ELECTRONICALLY FILED BARBARA STROUGO, Individually and on DOC#: Behalf of All Others Similarly Situated, I DATE FI--LE_D_:~1~)~l~....., j+-L0_, 1 -·----' Plaintiffs, OPINION AND ORDER -against- 14-cv-5797 (SAS) BARCLAYS PLC, BARCLAYS CAPITAL INC., ROBERT DIAMOND, ANTONY JENKINS, CHRISTOPHER LUCAS, TUSHAR MORZARIA, and WILLIAM WHITE, Defendants. )( SHIRA A. SCHEINDLIN, U.S.D.J.: I. INTRODUCTION Plaintiffs bring this putative class action on behalf of themselves and all others similarly situated against Barclays PLC and Barclays Capital Inc. (collectively, "Barclays"), and Robert Diamond, Antony Jenkins, Christopher Lucas, Tushar Morzaria, and William White (the "Individual Defendants" and, together with Barclays, "defendants"). The putative class consists of all persons and entities who purchased Barclays PLC's American Depositary Shares ("ADSs") between August 2, 2011 and June 25, 2014 and were allegedly damaged thereby. On June 25, 2014, the New York State Office of the Attorney General ("NYAG") brought a lawsuit against Barclays under New York's Martin Act, Case 1:14-cv-05797-SAS Document 38 Filed 04/24/15 Page 2 of 45 alleging that Barclays concealed information about the operation of its “dark pool” — marketed as Barclays’ Liquidity Cross or LX — a private trading venue where investors can trade stocks with near anonymity. Borrowing heavily from the complaint in the NYAG action, plaintiffs allege that the success of LX was accomplished through false representations about its transparency and safeguards. Contrary to these representations, Barclays not only allowed aggressive high frequency traders (“HFTs”) in its dark pool, but it sought them out and gave them the information they needed to take advantage of other traders.
    [Show full text]
  • Are British Banks Bankable?
    ARE BRITISH > Libor scandal More than a dozen banks are under investigation by BANKS BANKABLE? authorities in Europe, Japan and the US over suspect- ed rigging of the London Interbank Offered Rate Royal Bank of Scotland (RBS) would (Libor). Barclays has already been fined $451 million by pay £390 million to US and British British and US regulatory bodies for its part in manip- authorities to settle allegations it ulating Libor rates. The scandal also affected RBS, manipulated benchmark interest Lloyds and HSBC in Britain and Swiss bank UBS rates. To avoid a public backlash, the > Mis-selling interest-rate hedging products British bank said it was cutting Last month Britain’s FSA said it found in the 173 bonuses to help pay the fine. A look interest-rate swap test cases it had examined, about at some of the scandals that have 90 per cent did not comply with regulatory engulfed banks requirements. So far, Barclays has taken the highest in Britain provision, setting aside £450 million for compensation, HSBC about £150 million and RBS £50 million > Mis-selling insurance Usually, payment protection insurance policies were offered to those taking a personal loan or mortgage to cover repayments, if clients were taken ill or lost their jobs. However, the policies were often sold to those who did not want or need these. So far, banks have set aside more than £12 billion to deal with the scandal > Anti-money laundering breaches In September, Standard Chartered was fined $340 million by a New York regulator for illegally hiding transactions with Iran, allowing the country to sell its oil for dollars from at least 2001 to 2007.
    [Show full text]
  • Download PDF (54.1
    17 The Moral of History or Immoral History? The name of protagonists, the signs of financial establishments as the dates are followed and certainly do not resemble each other. The story told, however, is always the same, punctuated by personal interests, greed, accidents on the financial markets described as “unpredictable”… so many episodes that marked the life of the past twenty-five years as “the more things change the more they stay the same”, as the Anglo- Saxons would say. A list – which does not claim to be exhaustive – of the scams and fraud of the world of finance and revealed only during a part of 2012 would indeed be eloquent. Let us begin with a case which lasted just as long as the Madoff scam, namely that committed by the owner of “Peregrine Financial Group”, who stole altogether the assets of his depositors. To build offices for $18 million or to pay fines handed down by regulatory authorities… whereby only $5 million remained in the accounts of his clients, which were supposed to amount to $200 million! A scam comparable with the best of them, made public in the Fall 2011, called “MF Global”, except that it was some $1,600 billion that went missing. Now let us talk about the illegitimate losses of $9 billion deposited during this period of 2012 by a JP Morgan Chase trader nicknamed “London Whale”… Or the shocking example of one of the premier banking institutions in the world, HSBC, which had to disclose that it was a repeat offender of money laundering.
    [Show full text]
  • FOREX Scandal: Top Banks Face Antitrust Fines
    34 REVIEW OF BANKING & FINANCIAL LAW VOL. 35 IV. FOREX Scandal: Top Banks Face Antitrust Fines A. Introduction Foreign exchange, more popularly known as “Forex” or “FX,” is the “conversion of one currency into another.”1 Forex is a virtual, global market where users continuously buy and sell currencies at an exchange rate, which is “the price paid for one currency in exchange for another.”2 Big banks and other providers control the electronic platforms where trading occurs.3 The Forex market is the “largest financial market in the world,” with daily trade volumes exceeding $5 trillion,4 even though physical money rarely exchanges hands.5 While there are numerous global currencies, most international Forex trading is conducted using the U.S. Dollar, Yen, and Euro.6 In 2013, evidence revealing deliberate manipulation of Forex rates by traders at several large banks came to light.7 In what later became known as the “Forex Scandal,”8 Forex traders conspired to rig market rates in order to accrue substantial financial gains, to the 1 Foreign Exchange, INVESTOPEDIA, http://www.investopedia.com/terms /f/foreign-exchange.asp [http://perma.cc/3P26-6WYT]. 2 Matt Cavallaro, The Forex Market: Who Trades Currency and Why, INVESTOPEDIA, http://www.investopedia.com/articles/forex/11/who-trades- forex-and-why.asp [http://perma.cc/8QXA-H939] (“An exchange rate is the price paid for one currency in exchange for another.”); Philip Augar, How the Forex Scandal Happened, BBC (May 20, 2015), http://www.bbc.com/news/business-30003693 [http://perma.cc/2K9Z- GHUJ]. 3 Augar, supra note 2.
    [Show full text]