Regulatory News - Serious Fraud Office Investigating FOREX Rigging

Author:Mr Paul Friedman, Conrad Walker, Nicola Vinovrski, Danielle Rodgers, Anna Myrvang, Michael Clark and Emma Holmes
Profession:Clyde & Co

On 21 July 2014, the Serious Fraud Office (SFO), which has been collecting information over the past few months, opened a criminal investigation into allegations of fraudulent conduct in the foreign exchange (Forex) market. This investigation will target individuals, who risk imprisonment, and banks who risk fines similar to those imposed following the LIBOR scandal, in relation to which banks and inter-dealer brokers have paid out more than USD 6 billion so far. The SFO has the power to investigate both anti-trust and fraud offences.

Around 15 international agencies are currently investigating claims of collusion and price manipulation in Forex, the abuses allegedly having been coordinated using online chatrooms. The SFO will work together with both the Financial Conduct Authority (FCA) and the US Department of Justice (DoJ), which launched its own criminal investigation in October last year. The DoJ is examining, among other allegations, whether traders from different banks colluded to share information over the spread they were charging large investors, and whether they used knowledge of upcoming client orders to "front run" trades (i.e. to use information about client orders to trade in advance to improve the trader's own position).

At least 15 banks have co-operated with regulators in London, Europe and the US, in addition to conducting their own internal investigations. Deutsche Bank has allegedly fired three Forex traders in New York as a result of the inquiry, and about 20 senior traders across the banking sector have been suspended. An official SFO investigation could protect some traders from any potential...

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