By Aruna Viswanatha
WASHINGTON Oct 29 The U.S. Justice Department
is investigating the manipulation of foreign exchange rates, a
top federal prosecutor said on Tuesday, in the first public
acknowledgement of such a probe in the United States.
Criminal and antitrust authorities have an "active, ongoing
investigation" into the possible manipulation, Mythili Raman,
the acting head of the department's criminal division, said.
The confirmation comes on the same day Dutch bank Rabobank
agreed to pay more than $1 billion to resolve allegations that
it manipulated Libor and other benchmark rates. And other
European banks that face related probes disclosed they set aside
major sums to cover legal costs.
Over the past two years, regulators and prosecutors have
extracted billions in fines from global banks after finding that
they rigged Libor, the average rate at which a panel of banks
expects to borrow money.
The Libor rates have been susceptible to manipulation
because they are based not on specific transactions, but on a
survey of where banks think they can borrow.
As a result, authorities have turned to other benchmarks,
including those that undergird the $5.3 trillion-a-day currency
market, to investigate whether they are open to similar kinds of
Regulators in Switzerland, the United Kingdom, and Hong Kong
said earlier this month they were investigating the conduct in
COOPERATION FROM BANKS
U.S. prosecutors will use information provided by the banks
that have already resolved Libor charges to investigate the
other benchmarks, Raman said in an interview.
Banks including Barclays, UBS AG, Royal
Bank of Scotland, and now Rabobank have paid
more than $4 billion to date and have agreed to turn over all
information that the Justice Department asks of them for at
least two years as part of their settlements.
"That's one of the most significant benefits that law
enforcement has been able to secure as part of this
investigation," Raman said.
Raman said she could not comment on any details of the
investigation, but Reuters previously reported that authorities
were examining allegations centered on the Swiss
Switzerland's UBS also disclosed on Tuesday that it had
received requests from "various authorities" relating to its
foreign exchange business.
The bank, which paid $1.5 billon last year to resolve Libor
charges, said it had taken "swift action" to review how it
trades foreign exchange.
The chairman of rival Credit Suisse said earlier this month
his bank had not found any evidence of misconduct in the forex
market following inquiries from regulators.
Also earlier this month, RBS handed Britain's financial
regulator instant messages sent by a former currency trader to
counterparts at other banks.
The Libor settlements "basically bind all of these
institutions to a kind of long-term cooperation with all
involved enforcement authorities," said Robertson Park, who
prosecuted the Libor case against Barclays and is now in private
practice at the law firm Murphy & McGonigle.
This gives law enforcement "a huge leg up," he said.