A criminal investigation has been commenced by the Serious Fraud Office following alleged fraudulent conduct by traders dealing in foreign exchange currencies. The criminal investigation is set to examine the actions of several traders employed at top city banks who have allegedly colluded to fix exchange rates in order to profit from the lucrative £3 trillion a day market.
The SFO were unwilling to name and shame at such an early stage, however it is understood that the collusion spread across top banks and several financial institutions. Regulators worldwide among which are Hong Kong, the US, Switzerland and the UK authorities have taken steps by digging into allegations of exchange rate fixing. However, the SFO marks the first official criminal investigation to take place.
London is said to be the capital of the foreign exchange rate market where somewhere around 40% of trading takes place. It is in the capital where several traders are facing allegations of collusion following discoveries of online chatroom messages which have discussed business affairs. The Financial Conduct Authority, which is the British financial regulator begun an in depth review of the foreign exchange market in 2013.
The matter was also taken very seriously by the Bank of England who appointed Lord Grabiner QC to investigate whether some of its own members were involved in the currency manipulation which is said to have taken place in the years between 2005 and 2013. To date, over 25 traders some of which work in the world’s biggest banking institutions have been put on suspension or have been fired worldwide as the regulators continue their investigations.
There are large concerns looming especially over the benchmark which is popularly known as the 4pm fix which is used among insurance and pension funds in order to determine what they should pay for foreign currencies. This London fix was established in 1994 and is run in partnership between Reuters and WM. If however, the fix is discovered to have been manipulated then it is almost certain that this would have cost British businesses and investors millions of pounds which in turn would have been pocketed by the fixers.
Some of the world’s biggest banks are concerned that this scandal could likely escalate to the level of the Libor crisis which resolved to multi million pound fines for Britain’s lagers financial institutions. The several banks involved in the Libor rigging scandal have shared fines which combined total to almost £3bn.