Goldman Fined $109.5m for FX Misconduct

Goldman Sachs has been fined $54.75 million by both the US Federal Reserve (Fed) and New York Department of Financial Services (NYDFS) for “unsafe and unsound” practices in its FX trading business.

Totalling $109.5m, these fines are part of a consent order that the bank has agreed to that will also see it submit to NYDFS written plans for enhanced internal controls and compliance risk management.

The fines announced today stems from an investigation by NYDFS determining that from 2008 to early 2013, Goldman Sachs FX traders participated in multi-party electronic chat rooms, where traders, sometimes using code names to discreetly share confidential customer information, discussed potentially coordinating trading activity and other efforts that could improperly affect currency prices or disadvantage customers. 

“This improper activity sought to enable banks and the involved traders to achieve higher profits from execution of foreign exchange trades, sometimes at customers’ expense,” says the NYDFS in a release issued today.

The release explains that this activity occurred despite both outside guidance and internal policies designed to prevent improper trading practices. For example, the release says Goldman Sachs had specific policies addressing its FX business in place as early as 2001, and which evolved over time. However, escalation of compliance concerns did not always occur as it was supposed to, and this allowed the improper conduct to continue.

Indeed, although the NYDFS says that a senior member of Goldman Sachs’ global FX sales division raised concerns about the sharing of customer information, there is no evidence the supervisor took any steps to escalate these concerns with the bank’s compliance department.

“DFS’s investigation revealed that certain Goldman traders exploited the company’s ineffective oversight of its foreign exchange business by improperly sharing customer information, which allowed the bank’s foreign exchange traders and others to violate New York State law over the course of several years,” says NYDFS Superintendent, Maria Vullo. “DFS recognises the steps taken by the company to ensure compliance with applicable laws, in entering into today’s consent order and to the agreed reforms.”

galen@profit-loss.com
@Galen_Stops
@Profit_and_Loss

 

 

Galen Stops

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