Final Round of CFTC Fines Expected for LIBOR Manipulation

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The Wall Street Journal reported on Friday that the U.S. Commodity Futures Trading Commission and the U.K. Financial Conduct Authority are preparing charges against additional banks for manipulation of interest rate benchmarks. Market regulators have so far handed out billions in fines over the past four years and the worldwide investigations are expected to be drawing to a close. It has been almost eight years since information about the manipulation in this market was on the front page of the Wall Street Journal.

The fines will reportedly include some U.S. banks, which have so far largely escaped the fines levied for interest rate rigging. Citigroup is among the expected targets of the government investigation at this point. J.P. Morgan Chase is still being investigated by the CFTC but no decision has been made as to whether there will be an enforcement action against the bank according to the reports. The UK FCA reportedly dropped its inquiry into JPM last year. HSBC Holdings, a London-based bank, is another bank targeted in the investigation.

The fines for manipulation of interest rates and the foreign exchange currency market so far have been significant. The largest fine by the CFTC ever issued was levied against Deutsche Bank in April 2015. Deutsche Bank agreed to pay $800 million to the CFTC for false reporting and attempted manipulation of LIBOR (London Interbank Offered Rate) and Euribor (Euro Interbank Offered Rate) as part of a global $2.5 billion settlement with government authorities in the U.S. and United Kingdom.

Collectively, the CFTC has imposed over $4 billion in penalties against thirteen banks to address manipulation of the LIBOR and FOREX markets. Other institutions, both in the United States such as the Office of the Comptroller of the Currency and internationally such as the UK FCA have levied additional fines.

None of the fines remaining are expected to reach the size of the fines paid by Deutsche Bank. They are also still months away according to the media reports.

The final group of settlements may also avoid criminal charges according to the WSJ sources. The Justice Department is still continuing its investigations into possible charges, however.

The CFTC whistleblower program was recently criticized by the WSJ for only handing out two rewards in the five years since Congress passed the Dodd-Frank Act and authorized financial incentives for informant information regarding violations of the Commodity Exchange Act and CFTC rules. However, it is the investigations and fines like these which offer hope that the program is not a waste of taxpayer money and will be a game changer in the financial trading and investment banking world in the future. It is still early and far too soon to write the CFTC whistleblower program off.