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It appears that international banking fraud and market manipulation continues unabated.  The newest scandal brewing involves Swiss, British and American banks manipulating foreign currency exchange rates.  The LIBOR fraud scandal has apparently done nothing to improve the ethics of the global financial services industry. The implications of this probe of foreign currency trading manipulation are potentially no less monumental than the LIBOR (London Interbank Offered Rate) interest rate fraud of last year, which led to massive fines on many of these same banks.
Less than two weeks ago I posted on this blog the revelation that banking authorities in Switzerland had opened an investigation into foreign exchange (arbitrage) fraud by Swiss banks. My report went on to say that the investigation was uncovering implications of broader involvement of banking institutions outside of Switzerland. Today, the Financial Times in London published an explosive article naming 15 global banks now implicated in the expanding investigation of global foreign exchange fraud and manipulation.
Read more: Manipulation of global currency trading suspected by Swiss investigators
Read more:  Biggest Global Banks Face New Forex Fraud Probe

November 12, 2013 8:46 pm

Biggest international banks face forex probe questions

By Daniel Schäfer and Caroline Binham

The global probe into foreign exchange manipulation has widened to include 15 of the world’s biggest banks and some of the most actively traded currencies, as lenders scramble to help authorities in exchange for leniency.

The UK’s Financial Conduct Authority – one of seven regulators handling the worldwide investigation – has in so far requested information from at least 15 banks, according to two people close to the situation. The rapidly accelerating probe is looking at whether traders manipulated markets by sharing information and trading ahead of their clients.

Investigations by the FCA as well as authorities in Switzerland, the US and Hong Kong are focusing on the euro-dollar market, the most liquid currency market in the world which accounts for almost a quarter of the $5.3tn daily trading volume.
Regulators and banks are also scrutinising trading in sterling, Australian dollar and Scandinavian currencies, two people familiar with the situation said, pushing the probe well beyond the niche currency markets that were initially thought to be under review.
Joaquín Almunia, the European Union competition commissioner, said that several banks have handed over information to Brussels to assist it with its antitrust inquiries in the hope of winning leniency.
He said the commission would start directing more resources to the foreign exchange investigation once it had finished settling with banks who were involved in the Libor scandal, which he said had cast a shadow over “thousands of financial benchmarks”.
“Before Libor, people thought benchmarks could be trusted. Now there’s a presumption that there’s a risk of manipulation. Perhaps manipulation is not the exception but the rule.”
Banks have completed lengthy inquiries into whether traders rigged Libor and other benchmarks, but the global investigation into currency manipulation was sparked by a whistleblower, who approached the FCA with their concerns, several people familiar with the investigation said.
UK authorities have been looking foreign exchange markets for at least two years amid widespread suspicions among investors and market participants about possible manipulation of a crucial benchmark, the 4pm WM/Reuters fix.
But their concerns were repeatedly dispelled by senior traders and reviews by banks and authorities did not yield any results before this spring.
Authorities have started examining trading connected to an array of financial benchmarks after the Libor interbank lending rate scandal erupted in full force last year, so far prompting more than $3.5bn in fines against financial institutions.
The banks under investigation by the FCA and other regulators in the sprawling currencies probe include BarclaysCitigroupDeutsche BankGoldman SachsHSBC,JPMorganMorgan StanleyRoyal Bank of ScotlandStandard Chartered and UBS. All of those banks – and a number of others – have launched internal reviews.
Bankers have long claimed that the foreign exchange market is impossible to manipulate given its vast size, but the investigation’s focus on the most liquid currencies such as the euro undermines this argument.
A currency manager at a large asset manager said that despite the foreign exchange market’s liquidity, an order of some $200m or less would often be large enough to influence prices.

Post Author: David Mayes

Founder, Mayo615 Technology Partners Ltd., UBC adjunct faculty, Intel alumnus, technology assessment, international business, cleantech, fly fisherman, native Californian and citizen of France, who has been very fortunate to have traveled, lived and worked all over the globe. My wonderful wife, Isabelle has reintroduced me to my French Provençal heritage.

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