Libor Rigging Can Be Prosecuted Under U.K. Law, SFO Says

U.K. fraud prosecutors will investigate the manipulation of Libor and other interest rates after deciding that existing British criminal law covers the conduct involved.

U.K. law provides the basis to bring charges, David Green, the director of the Serious Fraud Office, said today in a statement. The U.K. joins the U.S. in criminally investigating how derivatives traders and rate submitters colluded to rig the London Interbank Offered Rate, or Libor.

The SFO probe began after Barclays Plc (BARC) was fined a record 290 million pounds ($455 million) by U.K. and U.S. authorities, and British politicians called for a criminal investigation. The U.K. Financial Services Authority, which levied the fine along with the U.S. Commodity Futures Trading Commission and the Justice Department, didn’t have the power to file criminal interest-rate manipulation charges.

The SFO won’t be starting the case from scratch. The agency has received regular briefings from the FSA on its civil investigation and a compilation of findings from the U.S. The SFO was told by the U.K. Treasury it would be given additional funds to take on the case after Barclays admitted its employees tried to manipulate rates for profit.

At least a dozen banks are being probed by regulators worldwide. In the U.S., the Justice Department is preparing to file charges this fall against traders from several banks in its investigation.

Osborne, Miliband

Green said on July 2 that the agency was considering whether it was possible to bring a prosecution after U.K. Chancellor of the Exchequer George Osborne and Ed Miliband, leader of the opposition Labour Party, called for a criminal probe. The agency, which declined to get involved for more than a year under its previous director, hired Mukul Chawla to be its lead external lawyer on the issue.

Osborne also called for a review of the functioning of Libor, and asked whether the FSA should have more extensive criminal powers that would allow it to prosecute market abuse relating to the rate and similar equivalents. Martin Wheatley, designated to become chief executive officer when the FSA becomes the Financial Conduct Authority, is handling the inquiry.

He will also consider whether the benchmark should be based on actual traded rates rather than ones submitted by the banks, and whether it should be regulated, the Treasury said today.

Confidence in Libor, a benchmark for financial products valued at $500 trillion worldwide, has been dented by Barclays’s admission that it submitted false rates.

To contact the reporter on this story: Lindsay Fortado in London at lfortado@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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