(Repeats Friday story with no changes)
By Jamie McGeever
LONDON, Feb 7 (Reuters) – Swiss bank UBS AG
approached U.S. authorities in September with information
relating to an industry-wide probe into alleged rigging of
currency markets, in the hope of gaining antitrust immunity if
charged with wrongdoing, sources familiar with the matter told
Reuters.
UBS is seeking to take advantage of a programme from the
Justice Department’s antitrust division under which the first
company to report misconduct relating to a cartel can earn
immunity from antitrust charges if it cooperates and provides
information about other members of the group, three sources
said.
Following the Libor interest-rate rigging scandal that has
so far cost banks around the world $6 billion in fines and
settlements, UBS sought to act quickly to gather and supply
information when similar allegations of wrongdoing by leading
banks in foreign exchange surfaced in June, the sources said.
No bank or individual has been accused of any wrongdoing but
banks, including UBS, have said they are cooperating with
regulators in the investigations. It is not known whether they
too have sought first-mover advantage under the DoJ programme.
UBS declined comment beyond pointing to a passage in its
third-quarter results released in October, saying that after
the June report of irregularities in forex markets, it had
started an internal review.
“UBS and other financial institutions have received requests
from various authorities relating to their foreign exchange
businesses and UBS is cooperating with the authorities,” the
bank said in its results statement.
Authorities including the U.S. Department of Justice (DoJ),
Britain’s Financial Conduct Authority (FCA) and watchdogs in
Germany and Switzerland are probing allegations of collusion
between senior traders at big banks to manipulate benchmark
currency rates.
These exchange rates or “fixes” are used to price trillions
of dollars worth of investments and deals and are relied on by
companies, investors and central banks globally.
Stung by Libor, banks are looking to cooperate more readily
with regulators probing the FX allegations, which FCA chief
Martin Wheatley has said are “every bit as bad as Libor”.
Banks have put on leave, suspended or fired more than 20
traders in an attempt to show regulators they are cooperating
and taking action.
FIRST TO COOPERATE
UBS, which received leniency from some U.S. authorities for
its role in rigging Libor benchmark interest rates because of
the information it supplied, scrambled to compile information on
currency trading and get it to the DoJ early, the people said.
The move was “a huge gamble” according to one source,
since it was handing over information with no guarantee that
it would benefit from a programme that rewards the first firm to
cooperate in a cartel probe with immunity from prosecution.
Although UBS paid $1.5 billion in 2012 to U.S. and European
authorities over alleged efforts to manipulate Libor and other
benchmark interest rates – the largest such penalty to date – it
did not face antitrust charges, which could have substantially
added to its penalties.
It was unclear whether the strategy will work in the FX case
as well. The sources said U.S. authorities have given little
sign so far of their intentions.
The DoJ declined comment.
The forex investigation centres on groups of traders at big
banks including UBS who are alleged to have shared on Bloomberg
chatrooms – with names such as “The Cartel” and “The Bandits’
Club” – market-sensitive information surrounding the benchmark
rate known as the 4 o’clock London fix.
After media reports of alleged forex market manipulation
surfaced in the summer of 2013, UBS went into “high gear”,
hiring lawyers Gibson Dunn & Crutcher who within 10 days
unearthed potentially incriminating chats by traders, the first
source said.
U.S. regulatory officials then visited UBS shortly after to
search for evidence, the sources said.
Having already cooperated with the DoJ on Libor, there was a
debate within the bank about how much to reveal about what it
had discovered on FX, the source said.
Then on Sept. 14 UBS called the DoJ to say something had
been discovered, the sources said. UBS could not at that stage
disclose what that something was, but would be reporting it 14
days later to the DoJ.
The sources did not give any detail about what had been
discovered.
Several sources familiar with the FX investigation have told
Reuters banks were rattled by Libor so were inclined to
cooperate much more readily with authorities when the FX scandal
emerged, to take advantage of “leniency programmes”.
HIGHER CHARGES
UBS is the world’s fourth-biggest currency trader, according
to the latest Euromoney poll, seeing just over 10 percent of the
$5.3 trillion that flows through the global market on an average
day.
In its fourth-quarter results on Feb. 4 it said it expected
higher charges for litigation, regulatory and similar matters in
2014. UBS already has a 1.7 billion franc reserve to deal with
legal tangles.
It also said several class-action lawsuits relating to the
FX probe had been filed against it and other banks.
The DoJ confirmed on Oct. 16 it was proceeding with a
criminal investigation into allegations of currency
manipulation, having been gathering information for some time,
though it did not name any banks.
Even if a company doesn’t get in the door first regarding
one type of conduct, it can still earn leniency by providing
information about another potential antitrust violation, giving
banks incentives to provide information about the manipulation
of forex rates and other potential misconduct.
The DoJ has in the past used such incentives to investigate
multiple cartels within the same industries, including in the
auto parts industry.
Banks that have resolved charges over Libor are also
obligated to turn over all information the DoJ asks of them for
at least two years, providing another motivation to cooperate.
Banks including UBS, Barclays and Royal Bank of
Scotland have paid billions of dollars to resolve the
charges and are under such disclosure obligations, and
prosecutors are drawing on that information to investigate do we
really need other benchmarks.
Top Justice Department officials have also said the Libor
agreements have been a huge asset to the agency’s forex probes.
“They don’t have much wiggle room other than going all-in on
cooperation from the onset,” said Robertson Park, a former fraud
prosecutor who worked on the Libor investigations including the
settlement with Barclays and is now in private practice at
Murphy & McGonigle, speaking of the banks that are under Libor
settlements.
(Additional reporting by Emily Flitter in New York, Aruna
Viswanatha in Washington and Katharina Bart in Zurich; Editing
by David Holmes and Alexander Smith)
