Forex scandal

The foreign exchange market (forex) had been largely unregulated, because regulators considered it "too big to be manipulated".

{{Quote box

|quote = Don't want other numpty's in mkt to know [about information exchanged within the group], but not only that is he gonna protect us like we protect each other ...

|source= —Citibank trader, on a prospective new member to the cartel chatroom{{cite news|last1=McCoy|first1=Kevin|title=Forex traders plotted strategy in secret chats|url=https://www.usatoday.com/story/money/business/2014/11/12/banks-forex-chat-room-excerpts/18901819/|access-date=13 November 2014|work=USA Today|date=12 November 2014}}{{cite web|title=FCA Final Notice 2014: JPMorgan Chase Bank N.A.|url=http://www.fca.org.uk/your-fca/documents/final-notices/2014/jpmorgan-chase-bank|publisher=Financial Conduct Authority|access-date=13 November 2014}}

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|title= Secret trading chatrooms

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At the center of the investigation were the transcripts of electronic chatrooms in which senior currency traders discussed with their competitors at other banks the types and volume of the trades they planned to place. The chatrooms had names such as "The Cartel", "The Bandits’ Club", "One Team, One Dream" and "The Mafia".{{cite news |first1= Liam |last1= Vaughan |first2= Gavin |last2= Finch |first3= Bob |last3= Ivry |name-list-style= amp |url=https://www.bloomberg.com/news/2013-12-19/how-secret-currency-traders-club-devised-biggest-market-s-rates.html |title=Secret Currency Traders' Club Devised Biggest Market's Rates |newspaper=Bloomberg News |date=19 December 2013 |access-date=3 February 2014}}{{cite news |first1= Katie |last1= Martin |first2= David |last2= Enrich |name-list-style= amp |url= https://www.wsj.com/news/articles/SB10001424052702304866904579267901064067572 |title=Forex Traders Said to Have Colluded in Effort to Profit |newspaper=Wall Street Journal |date=19 December 2013 |access-date=3 February 2014}} The discussions in the chatrooms were interspersed with jokes about manipulating the forex market and repeated references to alcohol, drugs, and women.{{cite news |first1= David |last1= Enrich |first2= Katie |last2= Martin |name-list-style= amp |url= https://www.wsj.com/news/articles/SB10001424052702303618904579171390414686878 |title=Currency Probe Widens as Major Banks Suspend Traders|newspaper=Wall Street Journal |date=1 November 2013 |access-date=3 February 2014}} Regulators were particularly focusing in on one small exclusive chatroom which was variously called The Cartel or The Mafia. The chatroom was used by some of the most influential traders in London and membership in the chatroom was highly sought after. Among The Cartel's members were Richard Usher, a former Royal Bank of Scotland (RBS) senior trader who went to JPMorgan as head of spot foreign exchange trading in 2010, Rohan Ramchandani, Citigroup’s head of European spot trading, Matt Gardiner, who joined Standard Chartered after working at UBS and Barclays, and Chris Ashton, head of voice spot trading at Barclays. Two of these senior traders, Richard Usher and Rohan Ramchandani, were members of the 13-member Bank of England Joint Standing Committee's chief dealers group.{{cite news |first1=Daniel |last1= Schäfer |first2= Alice |last2= Ross |first3= Delphine |last3= Strauss |name-list-style= amp |url=http://www.ft.com/cms/s/2/7a9b85b4-4af8-11e3-8c4c-00144feabdc0.html#axzz2sG2XPJec |title=Foreign exchange: The big fix |newspaper=Financial Times |date=12 November 2013 |access-date=3 February 2014}}

At least 15 banks including Barclays, HSBC, and Goldman Sachs disclosed investigations by regulators. Barclays, Citigroup, and JPMorgan Chase all suspended or placed on leave senior currency traders. Deutsche Bank, continental Europe’s largest lender, was also cooperating with requests for information from regulators.{{cite news|first1= Gaspard |last1= Sebag |first2= Aoife |last2= White |name-list-style= amp |title=Banks Said to Snitch on FX Rivals in Race to Avoid Fines|url=https://www.bloomberg.com/news/2013-12-20/banks-said-to-snitch-on-fx-competitors-in-race-to-avoid-eu-fines.html|access-date=21 January 2014|newspaper=Bloomberg News|date=19 December 2013}} Barclays, Citigroup, Deutsche Bank, HSBC, JPMorgan Chase, Lloyds, RBS, Standard Chartered, UBS and the Bank of England as of June 2014 had suspended, placed on leave, or fired some 40 forex employees.{{cite news|title=Forex Chatrooms Show Traders Shared Order, Price Details: Report|url=http://profit.ndtv.com/news/forex/article-forex-chatrooms-show-traders-shared-order-price-details-report-539899|access-date=1 July 2014|agency=Reuters|publisher=NDTV Profit|date=19 June 2014}}{{cite news |first1= Alice |last1= Ross |first2= Daniel |last2= Schäfer |first3= Gina |last3= Chon |name-list-style= amp |url= http://www.ft.com/intl/cms/s/0/03659de2-7dc8-11e3-95dd-00144feabdc0.html#axzz2sA4TUFeI |title=Deutsche Bank suspends traders amid global forex probe |newspaper=Financial Times |date=15 January 2014 |access-date=3 February 2014}}{{cite news |first1= Nicholas |last1= Comfort |first2= Karin |last2= Matussek |name-list-style= amp |url= https://www.bloomberg.com/news/2014-01-30/deutsche-bank-said-to-suspend-moraiz-in-currency-probe.html |title= Deutsche Bank Said to Suspend Moraiz in Currency Probe |newspaper=Bloomberg News |date=30 January 2014 |access-date=3 February 2014}}{{cite news |first1= Daniel |last1= Schäfer |first2= Patrick |last2= Jenkins |first3= Mike |last3= Mackenzie |first4= Kara |last4= Scannell |first5= Alex |last5= Barker |first6= Camilla |last6= Hall |first7= Caroline |last7= Binham |first8= Delphine |last8= Strauss |name-list-style= amp |title= Forex in the spotlight |url=http://www.ft.com/intl/cms/s/0/a296da48-9579-11e3-8371-00144feab7de.html#axzz2tfdCIcDV|access-date=18 February 2014|newspaper=Financial Times|date=16 February 2014}} Citigroup had also fired its head of European spot foreign exchange trading, Rohan Ramchandani.{{cite news|last=Bases |first=Daniel |url=http://uk.reuters.com/article/forex-citi-probe-idUKL2N0KK29920140110 |archive-url=https://web.archive.org/web/20181203231222/https://uk.reuters.com/article/forex-citi-probe-idUKL2N0KK29920140110 |url-status=dead |archive-date=3 December 2018 |title=Citi's European spot forex head trader Ramchandani out amid probe |publisher=Reuters |date=10 January 2014 |access-date=3 February 2014}} Reuters reported hundreds of traders around the world could be implicated in the scandal.{{cite news|first=Jamie |last= McGeever |url=https://www.reuters.com/article/us-banks-deutsche-idUSBREA0E0JH20140115 |title=Deutsche Bank, Citi feel the heat of widening FX investigation |newspaper= Reuters |date=15 January 2014 |access-date=28 July 2016}}

As of December 2014, the monetary losses caused by manipulation of the forex market were estimated to represent $11.5 billion per year for Britain’s 20.7 million pension holders alone (£7.5B/year).{{cite news|url=https://www.thebureauinvestigates.com/2014/12/04/new-banking-scandal-could-cost-savers-billions/|title=New banking scandal could cost savers billions|date=4 December 2014|first=Nick|last=Mathiason|publisher=The Bureau of Investigative Journalism|location=London|access-date=23 May 2015|archive-date=24 May 2015|archive-url=https://web.archive.org/web/20150524115745/https://www.thebureauinvestigates.com/2014/12/04/new-banking-scandal-could-cost-savers-billions/|url-status=dead}}{{failed verification|date=August 2015}} The manipulations affected customers all around the world, for over a decade. The manipulations' overall estimated cost is not yet fully known.

On 12 November 2014, the United Kingdom's Financial Conduct Authority (FCA) imposed fines totaling $1.7 billion on five banks for failing to control business practices in their G10 spot foreign exchange trading operations, specifically: Citibank $358 million, HSBC $343 million, JPMorgan $352 million, RBS $344 million and UBS $371 million. The FCA determined that between 1 January 2008 and 15 October 2013 the five banks failed to manage risks around client confidentiality, conflict of interest, and trading conduct. The banks used confidential customer order information to collude with other banks to manipulate the G10 foreign exchange currency rates and profit illegally at the expense of their customers and the market. On the same day the United States Commodity Futures Trading Commission (CFTC) in coordination with the FCA imposed collective fines of $1.4 billion against the same five banks for attempted manipulation of, and for aiding and abetting other banks’ attempts to manipulate, global foreign exchange benchmark rates to benefit the positions of certain traders. The CFTC specifically fined: $310 million each for Citibank and JPMorgan, $290 million each for RBS and UBS, and $275 million for HSBC.{{Cite web|url= http://www.cftc.gov/PressRoom/PressReleases/pr7056-14#PrRoWMBL|title= CFTC Orders Five Banks to Pay over $1.4 Billion in Penalties for Attempted Manipulation of Foreign Exchange Benchmark Rates|date= 12 November 2014|access-date= 13 November 2014|publisher= Commodities Futures trading Commission}}

The CFTC found that currency traders at the five banks coordinated their trading with traders at other banks in order to manipulate the foreign exchange benchmark rates, including the 16:00 WM/Reuters rates. Currency traders at the banks used private chatrooms to communicate and plan their attempts to manipulate the foreign exchange benchmark rates. In these chatrooms, traders at the banks disclosed confidential customer order information and trading positions, changed trading positions to accommodate the interests of the collective group, and agreed on trading strategies as part of an effort by the group to manipulate different foreign exchange benchmark rates. These chatrooms were often exclusive and invitation only.

On 20 May 2015, the five banks pleaded guilty to felony charges by the United States Department of Justice and agreed to pay fines totaling more than $5.7 billion. Four of the banks, including Barclays, Citigroup, JP Morgan, and Royal Bank of Scotland pleaded guilty to manipulation of the foreign markets; while the others had already been fined in settlements from the November 2014 investigation, Barclays had not been involved and was fined $2.4 billion. UBS also pleaded guilty to committing wire fraud and agreed to a $203 million fine. A sixth bank, Bank of America, while not found guilty, agreed to a fine of $204 million for unsafe practices in foreign markets.{{cite web |url= https://www.reuters.com/article/us-banks-forex-settlement-idUSKBN0O50CQ20150520 |title= Major banks admit guilt in forex probe, fined $6 billion |first1= Karen |last1= Freifeld |first2= Steve |last2= Slater |first3= Katharina |last3= Bart |name-list-style= amp |publisher= Reuters |date= 20 May 2015 |access-date= 20 May 2015 }}{{cite web |url= https://www.bbc.com/news/business-32817114 |title= Record fines for currency market fix |publisher= BBC |date= 20 May 2015 |access-date= 20 May 2015 }}

On 18 November 2015 Barclays was fined an additional $150m for automated electronic foreign exchange misconduct.{{Cite press release |url=http://www.dfs.ny.gov/about/press/pr1511181.htm |title=NYDFS Announces Barclays to Pay Additional $150 Million Penalty |id=1511181 |publisher=New York State Department of Financial Services |date=18 November 2015 |access-date=9 June 2020 |archive-url=https://web.archive.org/web/20160318213118/http://www.dfs.ny.gov/about/press/pr1511181.htm |archive-date=18 March 2016 |url-status=dead }}

On 19 December 2014 the first and only known arrest was made in relation to the scandal. The arrest of a former RBS trader took place in Billericay, Essex, and was conducted by the City of London Police and the Serious Fraud Office.{{Cite web|date=2014-12-19|title=First arrest made in foreign exchange market rigging investigation|url=http://www.theguardian.com/uk-news/2014/dec/19/foreign-exchange-market-rigging-first-arrest|access-date=2021-08-03|website=The Guardian|language=en}}

Several traders have been incarcerated for market manipulation in recent years. The longest conviction was that of Tom Hayes; Hayes, a British citizen and ex-UBS trader, received a 14-year sentence in 2015.{{cite web|url=https://www.economist.com/blogs/graphicdetail/2015/08/conviction-tom-hayes|title=Sentenced to 14 years' hard LIBOR|last=Economist|first=The|date=4 August 2015|publisher=The Economist|access-date=26 December 2015}}

As of November 2014, respective authorities announced remediation programmes aimed at repairing trust in their banking systems and the wider foreign exchange market place. In the United Kingdom, the FCA has stated that the changes to be made at each firm will depend on a number of factors, including the size of the firm, its market share, impact, remedial work already undertaken, and the role the firm plays in the market. The remediation programme was to require firms to review their IT systems in relation to their spot FX business, as the banks relied on legacy technologies that allow for the existence of dark-data silos within which manipulation is able to occur unnoticed by compliance systems.{{cite news|last1=Howes|first1=Gary|title=Exchange Rate Rigging Allowed to Thrive in 'Dark Data' Blindspots |url=http://www.poundsterlinglive.com/gbp-live-today/1740-forex-scandal-dark-data-453454|access-date=22 December 2014|publisher=Pound Sterling Live|date=14 November 2014}}

In Switzerland, the Swiss Financial Market Supervisory Authority announced in December 2014, that for a period of two years UBS would be limited to a maximum annual variable compensation to 200% of the basic salary for foreign exchange and precious metals employees globally. UBS was instructed to automate at least 95% of its global foreign exchange trading, while effective measures must be taken to manage conflicts of interest with a particular focus on organisational separation of client and proprietary trading.{{Cite web |url=http://www.finma.ch/e/aktuell/Pages/mm-ubs-devisenhandel-20141112.aspx |title=FINMA sanctions foreign exchange manipulation at UBS |date=11 December 2014 |access-date=22 November 2014 |publisher=Swiss Financial Market Supervisory Authority |url-status=dead |archive-url=https://web.archive.org/web/20141115011002/http://www.finma.ch/e/aktuell/Pages/mm-ubs-devisenhandel-20141112.aspx |archive-date=15 November 2014 |df=dmy }}

As of May 2015, the window in which the daily 4pm fix is calculated was extended to five minutes as recommended by the Financial Stability Board, a watchdog advising the G20 finance ministers and the Bank for International Settlements tried to get banks to agree a unified code of conduct.{{Cite news |date=2015-05-20 |title=How the forex scandal happened |language=en-GB |work=BBC News |url=https://www.bbc.com/news/business-30003693 |access-date=2022-03-05}}

• Fideres
• Libor scandal, 2012
• White-collar crime

{{Reflist|30em}}

;Bank of America

• {{cite web |url= http://www.occ.gov/news-issuances/news-releases/2014/nr-occ-2014-157b.pdf |title= Consent Order for Civil Money Penalty |work= In the Matter of: Bank of America N.A. |publisher= United States Office of the Comptroller of the Currency |date= 11 November 2014}}
• {{cite web |url= http://www.federalreserve.gov/newsevents/press/enforcement/enf20150520a1.pdf |title= Order to Cease and Desist |work= In the Matter of: Bank of America Corporation |publisher= United States Federal Reserve |date= 20 May 2015}}

;Barclays

• {{cite web |url= http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfbarclaysborder052015.pdf |title= Order Instituting Proceedings |work= In the Matter of: Barclays Bank Plc |publisher= United States Commodity Futures Trading Commission |date= 20 November 2015}}
• {{cite web |url= http://www.dfs.ny.gov/about/ea/ea150520.pdf |title= Consent Order |work= In the Matter of: Barclays Bank Plc |publisher= New York State Department of Financial Services |date= 20 May 2015 |access-date= 21 May 2015 |archive-date= 16 November 2017 |archive-url= https://web.archive.org/web/20171116063343/http://www.dfs.ny.gov/about/ea/ea150520.pdf |url-status= dead }}
• {{cite web |url= http://www.fca.org.uk/your-fca/documents/final-notices/2015/barclays-bank-plc |title= FCA Final Notice 2015: Barclays Bank Plc |publisher= United Kingdom Financial Conduct Authority |date= 20 May 2015}}
• {{cite web |url= http://www.justice.gov/file/440481/download |title= Plea agreement |work= United States of America v. Barclay Plc |publisher= United States Department of Justice |date= 20 May 2015}}
• {{cite web |url= http://www.federalreserve.gov/newsevents/press/enforcement/enf20150520a3.pdf |title= Order to Cease and Desist |work= In the Matter of: Barclays Bank Plc |publisher= United States Federal Reserve |date= 20 May 2015}}

;Citigroup

• {{cite web |url= http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfcitibankorder111114.pdf |title= Order Instituting Proceedings |work= In the Matter of: Citibank N.A. |publisher= United States Commodity Futures Trading Commission |date= 11 November 2014}}
• {{cite web |url= http://www.occ.gov/news-issuances/news-releases/2014/nr-occ-2014-157d.pdf |title= Consent Order for Civil Money Penalty |work= In the Matter of: Citibank N.A. |publisher= United States Office of the Comptroller of the Currency |date= 11 November 2014}}
• {{cite web |url= http://www.fca.org.uk/your-fca/documents/final-notices/2014/citibank-na |title= FCA Final Notice 2014: Citibank N.A. |publisher= United Kingdom Financial Conduct Authority |date= 12 November 2014}}
• {{cite web |url= http://www.justice.gov/file/440486/download |title= Plea agreement |work= United States of America v. Citicorp |publisher= United States Department of Justice |date= 20 May 2015}}
• {{cite web |url= http://www.federalreserve.gov/newsevents/press/enforcement/enf20150520a5.pdf |title= Order to Cease and Desist |work= In the Matter of: Citigroup Inc. |publisher= United States Federal Reserve |date= 20 May 2015}}

;HSBC

• {{cite web |url= http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfhsbcorder111114.pdf |title= Order Instituting Proceedings |work= In the Matter of: HSBC Bank Plc |publisher= United States Commodity Futures Trading Commission |date= 11 November 2014}}
• {{cite web |url=http://www.fca.org.uk/your-fca/documents/final-notices/2014/hsbc-bank-plc |title= FCA Final Notice 2014: HSBC Bank Plc |publisher= United Kingdom Financial Conduct Authority |date= 12 November 2014}}

;JPMorgan

• {{cite web |url=http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfjpmorganorder111114.pdf |title= Order Instituting Proceedings |work= In the Matter of: JPMorgan Chase Bank N.A. |publisher= United States Commodity Futures Trading Commission |date= 11 November 2014}}
• {{cite web |url=http://www.occ.gov/news-issuances/news-releases/2014/nr-occ-2014-157f.pdf |title= Consent Order for Civil Money Penalty |work= In the Matter of: JPMorgan Chase Bank, N.A. |publisher= United States Office of the Comptroller of the Currency |date= 11 November 2014}}
• {{cite web |url=http://www.fca.org.uk/your-fca/documents/final-notices/2014/jpmorgan-chase-bank |title= FCA Final Notice 2014: JPMorgan Chase Bank N.A. |publisher= United Kingdom Financial Conduct Authority |date= 12 November 2014}}
• {{cite web |url=https://www.justice.gov/file/440491/download |title= Plea agreement |work= United States of America v. JPMorgan Chase & Co |publisher= United States Department of Justice |date= 20 May 2015}}
• {{cite web |url=http://www.federalreserve.gov/newsevents/press/enforcement/enf20150520a2.pdf |title= Order to Cease and Desist |work= In the Matter of: JPMorgan Chase & Co |publisher= United States Federal Reserve |date= 20 May 2015}}.

;RBS

• {{cite web |url=http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfroyalbankorder111114.pdf |title= Order Instituting Proceedings |work= In the matter of: Royal Bank of Scotland Plc |publisher= United States Commodity Futures Trading Commission |date= 11 November 2014}}
• {{cite web |url=http://www.fca.org.uk/your-fca/documents/final-notices/2014/royal-bank-of-scotland |title= FCA Final Notice 2014: The Royal Bank of Scotland Plc |publisher= United Kingdom Financial Conduct Authority |date= 12 November 2014}}
• {{cite web |url=https://www.justice.gov/file/440496/download |title= Plea agreement |work= United States of America v. Royal Bank of Scotland Plc |publisher= United States Department of Justice |date= 20 May 2015}}
• {{cite web |url=http://www.federalreserve.gov/newsevents/press/enforcement/enf20150520a4.pdf |title= Order to Cease and Desist |work= In the Matter of: The Royal Bank of Scotland Plc |publisher= United States Federal Reserve |date= 20 May 2015}}

;UBS

• {{cite web |url=http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfubsorder111114.pdf |title= Order Instituting Proceedings |work= In the Matter of: UBS AG |publisher= United States Commodity Futures Trading Commission |date= 11 November 2014}}.
• {{cite web |url=http://www.fca.org.uk/your-fca/documents/final-notices/2014/ubs-ag |title= FCA Final Notice 2014: UBS AG |publisher= United Kingdom Financial Conduct Authority |date= 12 November 2014}}
• {{cite web |url=http://www.finma.ch/d/aktuell/Documents/ubs-fx-bericht-20141112-d.pdf |title=FINMA Summary Report UBS Foreign Exchange |publisher=Swiss Financial Market Supervisory Authority |date=12 November 2014 |access-date=14 November 2014 |archive-date=30 November 2014 |archive-url=https://web.archive.org/web/20141130185921/http://www.finma.ch/d/aktuell/Documents/ubs-fx-bericht-20141112-d.pdf |url-status=dead }}
• {{cite web |url=https://www.justice.gov/file/440521/download |title= Plea agreement |work= United States of America v. UBS AG |publisher= United States Department of Justice |date= 20 May 2015}}
• {{cite web |url=http://www.federalreserve.gov/newsevents/press/enforcement/enf20150520a6.pdf |title= Order to Cease and Desist |work= In the Matter of: UBS AG |publisher= United States Federal Reserve |date= 20 May 2015}}

;Government

• {{cite web |url= http://www.bankofengland.co.uk/publications/Documents/news/2014/grabiner.pdf |title= Bank of England Foreign Exchange Market Investigation |publisher= Bank of England |date= 12 November 2014 |access-date= 14 November 2014 |archive-date= 17 March 2017 |archive-url= https://web.archive.org/web/20170317194150/http://www.bankofengland.co.uk/publications/Documents/news/2014/grabiner.pdf |url-status= dead }}.

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