USA Charges Three in FX Manipulation Case

January 11, 2017

By Kalvin P. Chapman

In 2014 there were a number of UK and US fines for large banks relating to the manipulation of Foreign Exchange (FX) currency benchmarks.  On 10 January 2017 the US department of Justice announced that three individuals have been charged with crimes relating to this

[1].  Their press release says: 

“The one-count indictment, filed in the U.S. District Court for the Southern District of New York, charges Richard Usher (former Head of G11 FX Trading-UK at an affiliate of The Royal Bank of Scotland plc, as well as former Managing Director at an affiliate of JPMorgan Chase & Co.), Rohan Ramchandani (former Managing Director and head of G10 FX spot trading at an affiliate of Citicorp) and Christopher Ashton (former Head of Spot FX at an affiliate of Barclays PLC) with conspiring to fix prices and rig bids for U.S. dollars and euros exchanged in the FX spot market.”

Now, it is important to note that the original fines imposed by the US and UK regulators were issued on 12 November 2014[2].  Pursuant to section 63A(4), 88A(8), 89Q(8) & 131G(5) Financial Services & markets Act 2000 the FCA has a period of three years within which it can impose a penalties for wrong doing (for various offences).  The three years starts on the first day the FCA knew about the offence.  Consequently, it would appear highly unlikely that the FCA is currently still processing fines or other penalties/sanctions because it is highly likely that the FCA first knew of FX manipulation more than three years ago.

The Serious Fraud Office currently has no pending FX manipulation cases listed on its website[3].

It would therefore seem likely (but not absolutely certain) that no UK traders are going to see the inside of a Court Room as a consequence of the manipulation of FX currencies and benchmarks.  There were LIBOR prosecutions (some are still outstanding) but to date only one banker has been jailed[4].  Not one single person suffered any consequences as a consequence of the IRHP mis-selling scandal.  It is highly unlikely anyone will face the FCA or a Courtroom over the GRG scandal.

There have been calls for the FCA to be stripped of its enforcement powers[5].  It is alleged that the FCA is far too close to banks and traders to be able to properly and independently assess who should be prosecuted.  This is because many people at the FCA either worked for banks historically or are awaiting a role at a bank.  About the only person who historically could not be accused of this was Tracey McDermott, who used to be the enforcement officer for the FCA and then was its interim leader for a short period.  Ms McDermott is a former lawyer.  She resigned when the Government elected to give the leadership role to a former banker and not to her.  She indicated she would leave in April 2016, left in June 2016 and was on gardening leave until mid December 2016[6].

If the people at the regulator are too close to the Banks, can they be seen as effective people to take enforcement action?  The evidence, as it stands, appears to be that they cannot.  Despite finding astonishing and outrageous practices in the sale of PPI, the sale of hedging, the manipulation of LIBOR, the manipulation of precious metal benchmarks, the manipulation of a whole slew of other benchmarks, the breath-takingly large manipulation of all ten G10 currencies and their benchmarks and the crashing of the world economy through the sale of securitised mortgages[7], almost no enforcement has been taken against individuals.

It was astonishing that the leaders of HBOS and RBS were allowed to walk away despite the horrendous damage they not only did to the banks but to the wider economy that is still being felt today is outrageous on its own.  There were calls for 10 executives to be prosecuted[8] when the FCA/Bank of England’s long awaited report into HBOS[9] was produced, but due to the three year rule, none faced any prosecution.  One UK banker was prosecuted for his part in the collapse of the world economy[10].  Whilst he deserved everything he got, it is mind-boggling that the senior executives at HBOS and RBS walked away with substantial payments from the banks and gold plated pension pots.  Ordinary people would not only be prosecuted but would be jailed if they embarked on whole-sale fraud involving the sale of insurance that offered no insurance.  Despite that, not a single banker has been prosecuted over PPI and not one bank or finance house has been fined.  The fraud involving securitised mortgages has seen multi-billion pound fines.  But not one banker has faced a court room.  FX manipulation against saw multi-hundred million pound fines in the UK, EU and US.  They were classified as acting in cartels.  A few bankers were prosecuted, but not a single executive saw the inside of a Court room.

With the news that three bankers have been charged in the US and not a single person in the UK for manipulation of FX benchmarks and currencies means that it is now time for the Government to start looking at removing enforcement from the FCA and setting up an independent agency to undertake the prosecution of crimes involving finance houses, traders and bankers.  It cannot be right that trillions of dollars, pounds and euros were the subject of criminal manipulation and almost no-one has been prosecuted for it.  In fact, the only people that have really suffered are the customers and shareholders, all of whom will ultimately be the ones that pay the fines.  The bankers still get their gold-plated bonuses that are quite often greater than 10 years’ pay for ordinary people.  The US has now charged a number of people, but the UK has not charged a single person regarding FX manipulation.

The UK is the world banking capital.  It is time that the UK took the control and enforcement of the banking market seriously and stopped the FCA making the UK appear as if it condones this type of behaviour.  Since bad behaviour started in the 1980s the UK has not taken a tough approach.  We need to, otherwise the world banking sector will continue to have the name dripping in mud that it currently has.


[1] US Department of Justice Press Release 10 January 2017

[2] FCA Press Release 12 November 2014

[3] SFO List of Cases A-Z

[4] The Guardian 3 August 2015 “Former City trader Tom Hayes given 14-year sentence for Libor rigging”

[5]  Muldoon Britton 15 August 2016 “The FCA: Enforcement & The Future”

[6] Tracey McDermott Linked In profile

[7] UC Berkeley “The Transformation of Mortgage Finance and the Industrial Roots of the Mortgage Meltdown*”

[8] The Telegraph 19 November 2015 “Up to 10 former HBOS executives could be banned over collapse, damning report finds”

[9] Joint FCA & Bank of England report 19 November 2015 “The failure of HBOS plc (HBOS)”

[10] the Telegraph 12 September 2012 “FSA hands life ban to HBOS director Peter Cummings”

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