BaFin Chief Bank Supervisor: FX probe shows possible criminal acts

Germany’s national financial markets regulatory authority BaFIN has maintained its silence with regard to the global investigations into FX benchmark manipulation by some of the financial institutions responsible for large percentage of the world’s inter bank FX order flow.

Until now.

Just a few weeks after the UK, US and Swiss regulators closed their cases against six banks, resulting in a total of $3.3 billion in collective penalties, certain authorities are now beginning to investigate the possibilities of bringing criminal charges against banks and traders.

One such authority is Germany’s BaFIN, which according to a report by Reuters yesterday has discovered isolated cases of possible criminal activity in during its investigations into the practices conducted by banks with regard to FX trading.

“So far we have only found isolated cases but they are anything but reassuring. These are possibly criminal acts that could happen because checks failed,” Raimund Roeseler, Chief Executive Director Banking Supervision at BaFin told weekly German news source Wirtschaftswoche  in an advance copy ahead of publication.

Wirtschaftswoche expanded further on the subject by detailing that the BaFin investigation into foreign currency manipulation is ongoing, and that Mr. Röseler had stated that “This is a huge market, the investigation will take a while” during an interview with Business Week.

“So far we have only found individual cases, which are anything but reassuring. These are criminal acts could have been allowed to come about because checks have failed” Mr. Röseler said. Originally BaFin expected results from its investigations as early as this summer, and that the investigation into the manipulation of the LIBOR rate would be completed at the Deutsche Bank later this year, however Mr. Röseler would not confirm as to the current timescale for completion.

BaFIN’s potential opening of criminal cases against institutions and individuals follows the course of action currently being taken by Switzerland’s public prosecutor which commenced criminal proceedings against several bank traders in mid-November. The investigations which Switzerland is conducting are based on suspicion of “unfaithful financial management”, punishable by up to five years in prison or a fine, and “violation of professional secrecy”, which carries a penalty of up to three years in jail or a fine.

Britain’s finance ministry has gone down the same route, having pledged to hand the anti-fraud agency all the funds it needs in order to conduct a criminal investigation, with finance minister George Osborne having written to the Serious Fraud Office (SFO) to say it will be given the financial support it needs in order to carry it out.

Bearing in mind that the majority of manipulation was conducted by traders based in London, it is no surprise that the British authorities would seek to prosecute individuals in order to preserve their reputation as well as London’s standing as the world’s largest financial center.

Whilst North America’s Federal Bureau of Investigations (FBI) was the first law enforcement agency to begin considering treating FX rate manipulation among banks as a criminal matter in the latter part of 2013, no further mention of intent has been voiced by the FBI, despite the US regulatory authorities including the Commodity Futures Trading Commission (CFTC) having handed concluded its case against the six banks and issued its fiscal penalties.

That’s not to say that it may not resurface in the future once the FBI’s investigations are concluded.

Whilst the civil regulators have put an end to their probe resulting in expensive fines for the banks, it is clear that the case is absolutely not closed yet.


Read Also: