Traders at BofA to Credit Suisse named in rand-conspiracy probe

BANK OF AMERICA was among a number of large banks named in a probe by the South African government in a scheme to manipulate the exchange rate for its currency, the rand. / BLOOMBERG NEWS GRAPHIC
BANK OF AMERICA was among a number of large banks named in a probe by the South African government in a scheme to manipulate the exchange rate for its currency, the rand. / BLOOMBERG NEWS GRAPHIC

LONDON – Dozens of currency traders at some of the world’s biggest banks, from Credit Suisse Group AG to Bank of America Corp., have been named in a South African probe into an alleged scheme by the dealers to manipulate the value of the rand.

The traders, who regulators say were part of an illicit project to fix the price of the rand since at least 2007, include Bank of America’s Gavin Cook and Credit Suisse’s Christopher Hatton, according to a complaint against a group of lenders published by South Africa’s Competition Commission. Two others named in the document, ex-BNP Paribas SA employee Jason Katz and former Citigroup Inc. trader Christopher Cummins, have pleaded guilty to allegations in the United States for rigging emerging-market currencies, which include the rand.

The Competition Commission, which investigates cases, submitted the complaint to the Pretoria-based Competition Tribunal, which will hear the merits of the case before deciding on what penalties should be imposed, if any. The commission is urging that most of the banks be fined for colluding and manipulating trades in the rand.

The process should be shorter than most antitrust cases, due to the straightforward nature of the matter, a person familiar with the matter said on Thursday. Regulators aren’t seeking specific action against individual traders, but are likely to make demands to change incentives that may encourage dealers to push boundaries, the person said.

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The South African probe is the latest investigation into alleged rigging by the world’s biggest banks of the $5.1 trillion-a-day market for products tied to foreign exchange, which has resulted in more than $10 billion of penalties since Bloomberg first revealed manipulation in 2013.

Alleged conspiracy

“The collusive conduct between the respondents as set out above constitutes a single conspiracy by the respondents to fix prices and divide markets,” according to the Competition Commission’s complaint, which described the behavior as an “egregious and serious contravention” of South African law. “This type of collusive conduct is harmful to the consumers as it deprives them of the benefits which arise from competition.”

Bank of America’s Cook and Credit Suisse’s Hatton, both based in New York, didn’t immediately respond to requests for comment. Vanessa Neill, a spokeswoman for Credit Suisse in London, declined to comment. John McIvor, a spokesman for Bank of America in London, also didn’t comment.

Current and former traders at Standard Chartered PLC, Macquarie Group Ltd., Barclays PLC, Commerzbank AG and JPMorgan Chase & Co. also took part in a “conspiracy” forged through chatrooms, telephone conversations and meetings, the document alleges.

Standard Bank Group Ltd., Australia & New Zealand Banking Group Ltd. and other lenders named in the probe declined to comment when contacted about the investigation. Barclays Africa Group Ltd. and Citigroup are cooperating with regulators to avoid a fine, people familiar with the probe said Thursday. Investec PLC said in a statement on Friday the case is confined to a single trader and will seek more information from regulators.

A U.S. federal judge last month accepted an agreement between the Department of Justice and four banks including Citigroup and Barclays and ordered them to pay a $2.5 billion fine after they pleaded guilty to conspiring to fix prices in the foreign-exchange market. The European Union is moving toward settlement talks in its own investigation into banks’ currency dealings, people familiar with the matter said in November. The EU has refused to identify its targets.

Some 30 percent of daily turnover in the rand takes place in South Africa, of which foreigners account for 58 percent. In April 2016, the daily average worldwide foreign-exchange trading involving the rand was about $49 billion, according to Bank for International Settlements data, representing 1 percent of total turnover globally.

Trader suspended

Included in the allegations leveled by antitrust authorities on Friday is that banks:

  • Took turns trading so as not to compete
  • Posted fictitious bids and offers to manipulate the value of the rand
  • Coordinated trading activities around the daily London currency fix to help each other minimize their exposure
  • Agreed on prices to quote customers, sharing their customers identities, positions and order volumes
  • Agreed on the spread between bids and offers for currencies.

Also identified in the complaint by South African investigators were Katz, who has also worked for Barclays, Standard Bank and Australia & New Zealand Banking Group, and Cummins. Duncan Howes of Barclays Africa was also named in the complaint, which was posted on the tribunal’s website on Friday. Howes, who was with Barclays Africa from at least 2007, was suspended from the lender, people familiar with the situation said in May 2015.

Katz appeared in a Manhattan federal court in January, where he admitted to participating in a conspiracy with other bankers to manipulate emerging-market currency trades, including the rand, while working at three different financial institutions from 2007 to 2013. Cummins last month also pleaded guilty to rigging emerging-market currencies and agreed to cooperate in the U.S. investigation.

Katz’s lawyer Michael Tremonte and Cummins’s lawyer Evan Barr didn’t answer calls to their office or respond to an e-mail outside of work hours. Howes didn’t answer calls to his mobile phone.

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