The New York Department of Financial Services (DFS) announced it has fined Standard Chartered $40 million for attempting to rig transactions in foreign exchange (FX) markets between 2007 and 2013. The investigation found that Standard Chartered's traders used illegal tactics to maximize profits or minimize losses at the expense of the bank’s customers, or customers at other financial institutions (FIs).
“The integrity of the global financial system is compromised when the hunger for profit leads bankers and traders to turn a blind eye to the kind of illicit activities uncovered by DFS’ broad investigation,” said Superintendent of Financial Services Maria T. Vullo in a press release. “DFS appreciates Standard Chartered’s cooperation in this matter, and the bank’s acknowledgement of its critical obligation to ensure that its business is conducted lawfully.”
The DFS’ investigation discovered that traders used emails, phone calls and personal meetings to try to rig transactions. Traders based in New York even joined colleagues in other locations in a chat room called “Old Gits," which was formed to coordinate trading, share confidential information and otherwise affect FX prices. In fact, one trader described the chat room to a new member as “a den of thieves.”
The investigation also found that traders often ignored recommendations from regulators, and from the bank itself, that were designed to protect client confidentiality and effectively avoid trade on nonpublic information. In addition, the DFS found that Standard Chartered’s management did not properly supervise the bank’s FX business or ensure compliance with rules, regulations and laws.
Under the consent order, Standard Chartered must submit enhanced written internal controls and compliance programs acceptable to the DFS, as well as improve its risk management program and create an enhanced internal audit program. The bank also agreed to provide the DFS with ongoing progress reports to prove that it is meeting the objectives.