On Tuesday the New York State Department of Financial Services (DFS) released a statement saying that they had reached an agreement with Standard Chartered Bank where the bank pleaded guilty to currency manipulation including manipulation of the Rand. In exchange Standard Chartered will pay $40 million to the DFS.
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Stan Chart was part of the currency cartel
According to DFS a cartel of about 17 banks had “a general” agreement amongst themselves which saw them collude on prices for bids, offers and bid-offer spreads for the spot trades in trading involving the US dollar, the Rand as well as other currencies.
Further, the commission found that the respondents manipulated the price of bids and offers through agreements to refrain from trading and creating fictitious bids and offers at particular times.
They assisted each other to reach the desired prices by co-ordinating trading times. They reached agreements to refrain from trading, taking turns in transacting and by either pulling or holding trading activities on the Reuters currency trading platform.
Under the consent order with DFS, Standard Chartered admitted that it failed to implement effective controls over its foreign exchange business, which is conducted at its London headquarters and in other global financial centers, including at its New York branch,
This happened between 2007 and 2013. The result was that these banks manipulated prices of currencies at the expense of customers, theirs and those of other banks, and enriched themselves.
Alleged members of the cartel
- Bank of America Merrill Lynch International Limited
- BNP Paribas
- JP Morgan Chase & Co
- JP Morgan Chase Bank NA
- Investec Ltd
- Standard New York Securities Inc
- HSBC Bank PLC
- Standard Chartered Bank
- Credit Suisse Group;
Standard Bank of South Africa Ltd
- Commerzbank AG
- Australia and New Zealand Banking Group Limited
- Nomura International PLC
- Macquarie Bank Limited
- ABSA Bank Limited
- Barclays Capital Inc
- Barclays Bank PLC
The Competition Commission of South Africa is paying attention
You will note that on the list are three big South African banks Investec, Absa and Standard Bank. The South African Competition Commission’s interest was piqued by the details of this agreement between DFS and StanChart as well as they have ongoing litigation against these banks over the same issues.
StanChart meanwhile has promised to do better including creating better internal controls in order to prevent this from happening again in the future.