The New York Department of Financial Services (DFS) has fined Standard Chartered Bank $40 million for attempting to rig transactions in FX markets between 2007 and 2013.
An investigation by the DFS, as well as an internal review by the bank, found that bank traders used a range of illegal tactics to maximise profits or minimise losses at the expense of the bank’s customers or customers at other banks.
Specifically, it was found that between 2007 and 2013, traders based in New York and elsewhere joined traders at other locations in a chat room called “Old Gits”. According to the DFS, the chat room was formed so that traders could coordinate trading, share confidential information and otherwise affect FX prices, with one trader apparently describing the chat room to a new member as “a den of thieves”.
The DFS’s investigation found that traders regularly ignored guidance from regulators, as well as guidance from the bank itself, that was designed to protect client confidentiality and to avoid situations involving trading on non–public information. The DFS says that when questioned about sharing confidential information, a trader in New York admitted that he did so, while a supervisor in New York admitted that he regularly participated in chat rooms where widespread and improper information sharing occurred.
The DFS also found that the bank’s management failed to effectively supervise its FX business and ensure compliance with rules, regulations and laws. It found that the bank was slow to identify risks and develop policies and processes to govern the business and ensure compliance, and had few policies or training programs to guide staff about the line between proper and improper behaviour.
Following the investigation, StanChart fully cooperated with the DFS, providing documents and trading records, including information about certain areas of the FX business on its own initiative. The bank also took disciplinary action, including termination of employees identified by the DFS as engaging in misconduct, while other individuals resigned or were otherwise terminated for other reasons before disciplinary action related to trading could occur.
Under the terms of a consent order agreed with the DFS, StanChart is now obligated to submit enhanced written internal controls and compliance programs acceptable to the Department, improve its risk management program and establish an enhanced internal audit program.
“The integrity of the global financial system is compromised when the hunger for profit leads bankers and traders to turn a blind eye to the kind of illicit activities uncovered by DFS’s broad investigation,” says DFS Superintendent, Maria Vullo. “DFS appreciates Standard Chartered’s cooperation in this matter and the bank’s acknowledgement of its critical obligation to ensure that its business is conducted lawfully.”
Today’s action follows previous fines totaling $3.14 billion that DFS has levied against Barclays, BNP Paribas, Credit Suisse, Deutsche Bank, and Goldman Sachs to resolve unlawful conduct in their FX trading businesses.
However, the DFS says that its agreement with Standard Chartered marks the last in a series of consent orders that followed a detailed investigation of manipulation in the FX markets.