U.K. prosecutors are preparing to open a criminal investigation into alleged manipulation of foreign-exchange benchmarks, a person with knowledge of the matter said.
The Serious Fraud Office could announce the investigation as soon as this week, the person said, asking not to be named because the move isn’t public.
Authorities around the world have been investigating whether traders rigged the $5.3 trillion-a-day currency market after the U.K. Financial Conduct Authority began a review last year. Regulators and prosecutors are scrutinizing allegations that dealers at the world’s biggest banks traded ahead of their clients and colluded to rig the WM/Reuters rate, a benchmark that pension funds and money managers use to determine what they pay for foreign currencies.
“Individuals who participate in so-called rigging and commit fraud have no place in financial markets and should be identified and punished accordingly,” Marshall Bailey, who as president of ACI International represents people working in foreign exchange, said today. A criminal investigation wouldn’t be “unexpected, given the severity of the allegations.”
No firms or individuals have been accused of wrongdoing.
UBS AG, the fourth-biggest currency trader, has sought to reduce any potential punishment from U.S. and European Union authorities by cooperating with antitrust investigators and reporting on its own conduct in currency markets, people with knowledge of the matter said in February.
Citigroup Inc., Deutsche Bank AG and Barclays Plc, the other top currency dealers according to Euromoney Institutional Investor Plc’s annual survey, have said they are cooperating with the foreign-exchange investigations.
Spokesmen for Citigroup, Barclays, Deutsche Bank and UBS declined to comment on the probes.
“We are receiving and examining complex data on this topic,” the SFO said yesterday in an e-mailed statement. “If and when we open a criminal investigation, that decision will be announced.”
More than 25 traders have been fired, suspended or put on leave after the manipulation allegations emerged last year.
“The goal of any probe should be to root out wrongdoers on an individual basis, rather than vilify banks,” ACI’s Bailey said in an e-mailed statement. “The actions of a small unrepresentative minority should not be seen to reflect the broader health of the industry, or trigger wider structural reform to what remains a highly efficient FX market.”
The Sunday Times reported earlier yesterday that the SFO is preparing to announce the investigation.
While the FCA has taken the lead in probing the allegations in the U.K., the U.S. Department of Justice has been investigating possible criminal angles to the matter since last year. Prosecutors there could bring charges and levy fines in the case as soon as this year, a person with knowledge of the affair said last month.
The SFO’s decision to wait to open an investigation of its own has prompted criticism from British lawmakers, who said the alleged offenses were similar to those found in manipulation of the London interbank offered rate, or Libor.
The Bank of England has also come under criticism from lawmakers in the currency-rigging affair. It suspended one employee and engaged an outside lawyer, Anthony Grabiner, to probe allegations central-bank officials condoned practices at the heart of the investigations.
Grabiner has been contacting traders who attended a 2012 meeting of a BOE committee, according to two people with knowledge of the matter. The chief dealers’ subgroup would meet with central bank representatives a few times a year to discuss trends and issues in the market. Grabiner is looking into allegations that the officials condoned practices such as sharing impending customer orders with counterparts at other firms.