Attestation Update – A&A for CPAs

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Next banking fiasco? Manipulating foreign exchange rates?

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The Wall Street Journal reports ”Flipped” Bankers Aid U.S. in Foreign-Exchange Probe – Criminal Charges Are Expected as Early as Next Month.

Looks like it is time to pay attention to a new fiasco. After manipulating LIBOR comes the foreign exchange rates, or forex.

Article appears to be based on lots of leaks. In a tossup between guessing whether the Justice Department or the banks are leaking most of the info, I’ll guess the slightly higher probability is the feds.

This new fiasco is apparently developed from information obtained during the LIBOR investigations.

Individual enforcement action this time

Article claims a number of traders agreed to cooperate and wear wires in their conversations with other traders in return for no or light prosecution for their past deeds. That should put a lot of other traders on tape saying incriminating things.

Tone of article suggests there will be criminal indictments on this fiasco, maybe as early as October. The investigation, running for a year already, is complete, with the information ready to go to a grand jury, per the article.

Several dozen traders have been suspended or fired, the article says.

Corporate level enforcement

Article says a large number of banks are involved in settlement negotiations. The list of likely banks fairly well overlaps the list of banks with other major settlements in recent years. The article names J.P. Morgan, Goldman Sachs, Citigroup, Barclays, HSBC, Standard Chartered, UBS, Deutsche Bank, and BNP Paribas as likely involved.

Negotiations are quite complicated, per the article, because of the involvement of many U.S. agencies and many regulators from multiple foreign countries.

The investigation is fairly well along because the article says the FRB and OCC have already sent letters to Morgan, Citigroup, and Morgan Stanley letting them know of possible enforcement action.


I’ve paid attention to enough of these massive banking fiascos to look at this article, read between the lines, and expect to see a large volume of enforcement actions with huge dollar signs in them to be announced in the next couple of months. This time we might actually a round of criminal indictments and extradition requests.

Maybe I’ve earned the title of Captain Obvious after reading the article. Or maybe I just started paying attention.

In any event, I expect to see big headlines, starting within 3 weeks, running for several months, and involving many banks.

Update 9-17 – Did a bit more research. Looks like this has been in the news for a few months. See the WSJ article Banks Seek Simultaneous Settlements in U.K. Foreign-Exchange Probe back on July 23.

On the other hand, that article suggests there are only a few banks wanting to get a simultaneous settlement with just the U.K.’s Financial Conduct Authority. No one wants to be the first to settle, thus the goal of simultaneous announcement. That’s different from the current article which suggests participation by most of the TBTF club with all of them looking for settlements with all the planet’s regulators.

Written by Jim Ulvog

September 15, 2014, 14:58 pm at 2:58 pm

Posted in Other stuff

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  1. […] mentioned the big banks are under investigation for allegedly manipulating forex: Next banking fiasco? Manipulating foreign exchange rates? Those are the rates used to trade currencies. In addition to admitting manipulation of Libor, many […]

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