FX-Rigging Inaction Prompts Criticism of U.K. Fraud Prosecutors

U.K. prosecutors face criticism by a senior politician for not joining the global currency-rigging investigation, less than two years after a delayed start in the Libor probe earned them similar rebukes.

While more than a dozen authorities on three continents are reviewing whether traders colluded with counterparts at other firms to manipulate benchmarks including the WM/Reuters rates, the Serious Fraud Office hasn’t begun a formal investigation. U.S. prosecutors began probing the allegations last year.

“If the alleged behavior is criminal then we need a criminal investigation and not just regulatory action,” Emily Thornberry, the spokeswoman for legal issues for the U.K. opposition Labour Party, said in an e-mail. The alleged offenses in the foreign-exchange market “seems similar to the Libor-rigging,” she said.

The SFO didn’t open an investigation into manipulation of the London interbank offered rate, or Libor, until July 2012, days after Barclays Plc was fined by U.K. and U.S. authorities for manipulating the benchmark, and nearly four years after the probes began. Since then, the British agency has charged six people with conspiring to rig the rate.

Thornberry has requested information from the attorney general through Parliament on what discussions the SFO has had with other regulators and prosecutors, and whether the agency has any plans to investigate the allegations, she said in the e-mail. The government’s chief legal adviser has to respond under English law to the two questions, submitted last week.


“The government needs to ensure that our law enforcement agencies respond to these very serious allegations swiftly and competently,” Thornberry said. “That did not happen over Libor, when the SFO initially tried to duck out of investigating it on cost grounds and is still playing catch-up.”

Nilima Fox, a spokeswoman for the SFO, declined to comment on whether they are considering opening a probe.

“The director has a range of criteria to consider when taking on an investigation,” Fox said. “It isn’t appropriate for us to give a running commentary on cases which might meet this criteria.”

Russell Hayes, a spokesman for the attorney general’s office, said it’s up to the SFO to decide which investigations to open and declined to comment on what Dominic Grieve will say in his response. The British markets regulator, the Financial Conduct Authority, sparked the probe when it asked four banks for documents last year. It opened a formal investigation in October.

Warning Signs

“It’s important that all regulatory and legal processes are observed properly, and part of that can be regulators establishing if they believe any criminal activity has taken place,” said Mark Garnier, a member of the Conservative party who sits on the Treasury Committee. “There’s a huge degree of sorting going on with the regulator over this and other scandals, and the regulator and the authorities need to get this right.”

The Bank of England was also criticized this week for not learning lessons from the Libor probe. Lawmakers from the Treasury’s Select Committee asked the central bank’s governor, Mark Carney, yesterday why it didn’t improve its internal policies for escalating issues after it failed to spot warning signs that Libor was being manipulated. The Bank is now embroiled in the currency-rigging probe after an official failed to raise concerns.

Blockbuster Funding

The SFO sought an extra 19 million pounds ($32 million) from the government to pay for “blockbuster” cases, including Libor, in January, boosting its annual budget by almost 60 percent. The SFO’s yearly funding plunged to 32 million pounds in 2013-2014 from 52 million pounds in 2008.

The agency has been criticized in recent years for collapsed cases and mismanagement of investigations. It dropped a prosecution of British businessman Victor Dahdaleh, accused of paying about 40 million pounds in bribes, five weeks into a two-month trial in December.

Though David Green, the SFO’s director, has said the agency won’t refuse to take cases because of costs, it will take funding for any probe into currency rate-rigging into account, said Glyn Powell, a London-based lawyer and the former head of the fraud division at the SFO.

“While it has publicly stated that it will never turn down an investigation for lack of funds, it remains a fact that it has very recently had to turn to the Treasury for additional funding to deal with its existing caseload,” Powell said. “Any major new investigation would require the SFO to expend significant financial resources.”

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