SFO Started Its Investigation into the Currency-Exchange Rigging

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By Stefan Larson on July 23, 2014 Intl News

Criminal investigation into the manipulation of exchange bench marks has finally been initiated by the U.K. prosecutors. Keep in mind that this investigation has been opened after a period of one year. Agencies all over the world have been running their research and investigations as to whether the investors rigged the currency market when the FCA opened its review a year ago. Approximately $5.3 trillion were rigged when the Financial Conduct Authority (FCA) initiated its review in 2013.

Prosecutors and Regulators all over the world are trying to find out whether the traders rigged the Reuter’s rate, and exchanged ahead of their customers and clients. Around 25 brokers have been either fired or suspended whereas a lot more have been put on leave. All the top most banks, including UBS AG (NYSE:UBS), Citigroup Inc. (NYSE:C), Barclays Plc (BARC.L) and Deutsche Bank AG (DBK: XETRA) are reported to have been coordinating with the investigation agencies. However, when asked about the Serious Fraud Office investigation, all these banks refused to comment.

The Department of Justice is also running its investigation in the region of U.S. Both FCA and DOJ are working side by side, and rumors have it that prosecutors, by the end of this year, will be able to file charges in the United States as well. Moreover, DOJ will also be able to levy fines on the fraudulent parties. The expansion of the investigation might prove beneficial as more and more transactions would be listed down on the electronic platforms. Although other transactions like equities have been shifted to machines but the currency trading is still supervised by traders. The clients, more often than not, rely onto their broker and dealers for the order confirmation and book information.

According to the head (market research), Kevin McPartland, at a financial research firm, Stamford, the investigation will improve the forex trading in a way that more and more transactions will be electronically supervised and will be based on algorithms. He further commented that the customers will suffer from many negative short term impacts because the banks will now provide their clients with less market color, fearing that their actions might seem improper to the regulators.

Many criticisms have been raised on such a delayed investigation by the Serious Fraud Office. The law makers are of the opinion that these offences are similar to the ones that were found in Libor. An investigation on Libor is also running side by side, and approximately 17 people have been charged with alleged rigging of the benchmark interest rate. Moreover, around 12 people have been charged with ‘conspiracy to defraud’ crime, the punishment of which is around 10 years in jail.

Lawmakers are also criticizing The Bank of England over the rigging issue. The Bank has hired an outside barrister to look into the matter and has suspended one of its employees. Currently, the barrister is investigating into the matter as to whether the Bank officials overlooked certain practices that were going on in the Bank, like leaking the impending confidential orders, placed by the Bank’s customers, to other firms.