NY regulator imposes $40m fine on Standard Chartered Bank for attempted FX market rigging

Maria Nikolova

A chat room called “Old Gits” was used by traders to coordinate trading, share confidential information and otherwise affect FX prices.

Standard Chartered Bank was fined $40 million by the New York Department of Financial Services (DFS) over attempted rigging of Forex markets.

In its announcement on the matter, DFS explains that its investigation and an internal review by the bank found that bank traders used a various illegal tactics to maximize profits or minimize losses at the expense of the bank’s customers or customers at other banks. Under the consent order with DFS, Standard Chartered admitted that it failed to implement effective controls over its FX business, which is conducted at its London headquarters and in other global financial centers, including at its New York branch.

DFS’s investigation of Standard Chartered found that traders used chatrooms, e-mails, phone calls and personal meetings to attempt to rig transactions. The illegal activities uncovered range from coordination of trading and spreads among traders to attempts to manipulate trading benchmarks, and trading to move prices in certain markets.

The misconduct occurred among salespeople and desk traders using “voice” trading through telephone and electronic communications to buy and sell currencies at Standard Chartered trading centers in such cities as New York and London.

Between 2007 and 2013, traders based in New York and elsewhere joined traders at other locations in a chat room called “Old Gits.” The chat room was used by traders to coordinate trading, share confidential information and otherwise affect FX prices. One trader described the chat room to a new member as “a den of thieves.” Membership in the chat room was controlled by its members who voted on whether new members were trustworthy enough to join.

DFS’s investigation concluded that traders repeatedly ignored guidance from regulators, as well as guidance from the bank itself, that was designed to protect client confidentiality and to avoid situations involving trading on nonpublic information.

DFS also determined that Standard Chartered’s management failed to effectively supervise the bank’s FX business and ensure compliance with rules, regulations and laws. The bank was slow to identify risks and develop policies and processes to govern the business and ensure compliance. The bank had few policies or training programs to guide staff about the line between proper and improper behavior.

DFS notes that the bank took disciplinary action, including termination of employees identified by DFS as engaging in misconduct. Other individuals resigned or were otherwise terminated for other reasons before disciplinary action related to trading could occur.

Under the consent order, Standard Chartered will have to submit enhanced written internal controls and compliance programs acceptable to the Department and to beef up its risk management program. It will also have to establish an enhanced internal audit program.

Today’s action follows previous fines totaling $3.14 billion that DFS has levied against Barclay’s Bank PLC, BNP Paribas, Credit Suisse, Deutsche Bank, and Goldman Sachs. All these actions concerned unlawful conduct in the FX trading segment.

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