Record £284m FCA fine for Barclays forex rigging

Barclays has been handed a record fine of £284.4m by the Financial Conduct Authority (FCA), the largest financial penalty ever imposed by the regulator, for failing to control business practices in its foreign exchange (FX) business in London

The FCA said that between 1 January 2008 and 15 October 2013, Barclays’ systems and controls over its FX business were inadequate, allowing traders to share information about clients’ activities inappropriately and attempt to manipulate spot FX currency rates.

The regulator said Barclays engaged in collusive behaviour in which traders from different banks, including Barclays, formed tight knit groups and communicated through electronic messaging systems including chat rooms.

Certain groups described themselves or were described by others using phrases such as ‘the players’, with one  chat room participant referring to himself and others in the chat room as ‘the three  musketeers’ and commenting ‘we all die together’.

Barclays primarily relied on its front office FX business to identify, assess and manage the relevant risks, but the front office failed to pick up on obvious risks associated with confidentiality, conflicts of interest and trader conduct, the FCA said.

Some of those responsible for front office management were aware of and/or at times involved in this misconduct, reflecting a failure to embed the right values and culture in Barclays’ FX business. Barclays’ control and risk functions failed to challenge effectively the management of these risks in the FX business.

The FCA said the failings in Barclays’ FX business persisted despite similar control failings in relation to Libor and the Gold fixing, which were the subject of previous FSA and FCA enforcement actions. Although Barclays made some improvements following these enforcement actions, it failed to take adequate steps to address the underlying root causes of the failings in its FX business.

Georgina Philippou, the FCA’s acting director of enforcement and market oversight said: ‘Instead of addressing the obvious risks associated with its business Barclays allowed a culture to develop which put the firm’s interests ahead of those of its clients and which undermined the reputation and integrity of the UK financial system.  Firms should scrutinise their own systems and cultures to ensure that they make good on their promises to deliver change.’

Barclays settled at stage two of the FCA’s investigation, qualifying for a 20% discount. Without this, the FCA would have imposed a financial penalty of £355.5m.

In addition, Barclays has paid by far the biggest fine in a US investigation into FX rigging which saw five global investment banks fined a total of $5.7bn (£3.6bn) by the US Department of Justice (DoJ) and Federal Reserve to settle charges including manipulating the FX market.

Four of the banks - JPMorgan, Barclays, Citigroup and RBS - have agreed to plead guilty to US criminal charges, while UBS is to plead guilty to rigging benchmark interest rates.

Barclays was fined the most, $2.4bn (£1.5bn), as it did not join other banks in November to settle investigations by UK, US and Swiss regulators. The bank has also said it will sack eight employees involved in the scheme.

 Barclays has paid $485m (£312m) to the New York Department of Financial Services and $400m (£257m) to the US Commodities Futures Trading Commission over similar charges.

Antony Jenkins, Barclays chief, said: ‘The misconduct at the core of these investigations is wholly incompatible with Barclays’ purpose and values.’

The FCA imposed penalties on other firms for FX failing in November 2014, with Citibank fined £225.5m, HSBC Bank £216.3m, JPMorgan Chase Bank £222.1m, Royal Bank of Scotland £217m and UBS £233.8m.

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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