Federal Regulators Fine Multiple Banks for Attempted Manipulation of Forex Benchmark Rates

The CFTC issued five orders (the "Orders") to file and settle charges against five banks for the attempted manipulation of, and for aiding and abetting other banks' attempts to manipulate, global foreign exchange ("Forex") benchmark rates.

According to the Orders, certain Forex traders at the banks coordinated their trading with traders at separate banks in an attempt to manipulate the Forex benchmark rates. The Orders found that the Forex traders at the banks used private chat rooms to communicate and plan their attempts to manipulate the benchmark rates. Additionally, the CFTC found that, in these chat rooms, the traders disclosed customer order information and trading positions, altered trading positions to accommodate the interests of the collective group, and agreed on trading strategies as part of an effort by the group to attempt to manipulate certain Forex benchmark rates.

Furthermore, the Orders found that the banks failed to assess adequately the risks associated with their Forex traders' participation in fixing certain benchmark rates, and lacked adequate internal controls to prevent improper communications by traders.

In addition to imposing a collective $1.4 billion civil penalty, the Orders also require the banks to take specified steps to implement and strengthen their internal controls and procedures, including supervising their Forex traders, to ensure the integrity of their participation in the fixing of foreign exchange benchmark rates and internal and external communications by traders.

CFTC Chairman Tim Massad issued a statement cautioning that the enforcement action "should be seen as a message to all market participants that wrongdoing and foul play in the financial markets is unacceptable and will not be tolerated."

In a related action, the Office of the Comptroller of the Currency fined three banks $950 million for Forex trading improprieties.

See: Examples of Misconduct in Private Chat Rooms; Order: Citibank, N.A.; Order: JPMorgan Chase Bank, N.A.; Order: Royal Bank of Scotland plc; Order: UBS AG; Order: HSBC Bank plc; Chairman Massad's Statement; OCC Press Release; OCC Consent Order against Bank of America, N.A.; OCC Consent Order for Civil Money Penalty against Bank of America, N.A.; OCC Consent Order against Citibank, N.A.; OCC Consent Order for Civil Money Penalty against Citibank, N.A.; OCC Consent Order against JPMorgan Chase Bank, N.A.; OCC Consent Order for Civil Money Penalty against JPMorgan Chase Bank, N.A.