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Libor stands for London Interbank Offered Rate, it is the agreed rate at which large banks charge each other for borrowing If you have any kind of consumer loan, it’s a fair bet that it’s based on LIBOR.

2017 LIBOR has been rigged since 2003 and now that everyone knows it they will abandon it in 2019. How the interest rates will be determined is anyones guess.


“Since 2008, we’ve reformed the banking system by ring-fencing our banks with more regulatory and capital requirements,” Peng told us. “But our economy is now much more dependent on the fast-money shadow-bank financing—which is more fickle in terms of extending credit and can expand or contract much quicker.” Peng was among the first during the financial crisis to suggest that the London interbank offered rate, known as Libor, was understating borrowing costs. As the then-head of U.S. interest rate strategy at Citigroup Global Markets in New York, Peng co-authored a note titled “Is Libor Broken?” in April 2008. The report, which led to a global focus on the risk that the benchmark was mispricing bank lending rates, said European banks were probably submitting lower-than-actual transacted rates to avoid “being perceived as a weak hand in a fragile market.”


#BANKSTER #LIBOR is totally made up bullshit fiction

Taibbi: Is LIBOR, Benchmark for Trillions of Dollars in Transactions, a Lie? While nuke kooks rage, British regulators reveal rip in financial space-time continuum and $350 trillion headache

Bloomberg headline on the story was a notable achievement in the history of understatement. It read:

The casual news reader will see the term “LIBOR” and assume this is just a postgame wrapup to the LIBOR scandal of a few years back, in which may of the world’s biggest banks were caught manipulating interest rates.

It isn’t. This is a new story, featuring twin bombshells from a leading British regulator – one about our past, the other our future. To wit:

  1. Going back twenty years or more, the framework for hundreds of trillions of dollars worth of financial transactions has been fictional.
  2. We are zooming toward a legal and economic clusterfuck of galactic proportions – the “uncertain future” Bloomberg humorously referenced.


A 2009 study by the Cleveland Fed found that 60 percent of all mortgages in the U.S. were based on LIBOR. Buried somewhere in your home, you probably have a piece of paper that outlines the terms of your credit card, student loan, or auto loan, and if you peek in the fine print, you have a good chance of seeing that the rate you pay every month is based on LIBOR.

Years ago, we found out that the world’s biggest banks were manipulating LIBOR. That sucked.

Now, the news is worse: LIBOR is made up.

Actually it’s worse even than that.

LIBOR is probably both manipulated and made up. The basis for a substantial portion of the world’s borrowing is a bent fairy tale.

The admission comes by way of Andrew Bailey, head of Britain’s Financial Conduct Authority. He said recently (emphasis mine):
“The absence of active underlying markets raises a serious question about the sustainability of the LIBOR benchmarks. If an active market does not exist, how can even the best run benchmark measure it?”

As a few Wall Street analysts have quietly noted in the weeks since those comments, an “absence of underlying markets” is a fancy way of saying that LIBOR has not been based on real trading activity, which is a fancy way of saying that LIBOR is bullshit.

LIBOR  – What is it and Why does it matter? THIS IS SO 2016

Libor, the London inter-bank lending rate, is considered to be one of the most important interest rates in finance, upon which trillions of financial contracts rest, and the exposure of its rigging has shocked many beyond the world of finance.


Banks no longer able to manipulate LIBOR,
Scale of the scandal This dwarfs by orders of magnitude any financial scam in the history of markets. Andrew Lo, MIT Professor of Finance

#Bankster Peter Johnson became the first man in the UK to admit rigging Libor and worked for #Barclays for more than 25 years.
Libor traders jailed in rigging trial Four City traders have been ordered to serve jail sentences after being convicted of rigging the Libor rate. Jay Merchant was sentenced to six-and-a-half years, while Peter Johnson, who pleaded guilty, and Jonathan Mathew were each jailed for four years. Alex Pabon received two years and nine months. All four worked for Barclays.
2015 Deutsche Bank staff questioned as part of Libor investigation
Current and former traders interviewed by SFO about manipulation of London interbank offered rate and euro counterpart. The FCA said this year that parts of Deutsche Bank had a “deeply ingrained” culture of “generating profits without proper regard to the integrity of the market”. It said the bank’s failings had been compounded by it “repeatedly misleading” the regulator.

1/7/15 Bank of England was unaware of impending financial crisis
Privacy and Secrecy is allowed for the Banksters:  Bank of England code words Bradford and Bingley: "Badger"  Alliance and Leicester: "Tiger"  HBOS: "Fox"  Lloyds TSB: "Lark"  Royal Bank of Scotland: "Phoenix"

A month before the start of the financial crisis, the Bank of England was apparently unaware of the impending danger, new documents reveal.  In a unique insight into its workings, the Bank has published minutes of top-secret meetings of its governing body, the Court, between 2007 and 2009.  The minutes show that the Bank did identify liquidity as a "central concern" in July 2007.  However no action was taken as a result.  The documents show that the Bank also used a series of code names for banks that were in trouble.  Royal Bank of Scotland (RBS) was known as "Phoenix", and Lloyds TSB as "Lark".  Following publication, Andrew Tyrie MP, the chairman of the Treasury Select Committee, was highly critical of some of the Court's non-executive directors.  He said they had failed to challenge senior executive members, like the then governor, Mervyn King, whom some accuse of failing to prioritise financial stability.  "The minutes show that during the crisis the Bank of England did not have a board worthy of the name. This mattered. And it still matters," said Mr Tyrie.  John McFall, chairman of the treasury select committee at the time, told the BBC: "They all missed the wider picture.  "They missed the interconnectedness of the whole financial system...when Lehman went down it was a real catastrophe." 
On 9 August, the French bank BNP Paribas came clean about its exposure to sub-prime mortgages, in what some believe was the start of the financial crisis. Six weeks later, despite some turmoil in financial markets, Court members were told to have confidence in the triple oversight of the Bank of England, the Treasury and the then Financial Services Authority (FSA). "The Executive believed that the events of the last month had proven the sense and strength of the tripartite framework," the minutes asserted for the 12th September, 2007. The next day the banking crisis began in earnest. By November 2007 the Bank was using code words for other banks that were in danger of collapse - in an attempt to maintain confidence in the banking system.  In discussing a potential rescue for Alliance and Leicester - known as "Tiger"- it said the Bank's offer of £3bn of emergency funding should remain confidential.  "It was emphasised that there needed to be considerable secrecy about this facility," the minutes record. Members should have done more to challenge Mervyn King's view that the Bank's main purpose was monetary policy, rather than financial stability.  He said they had merely acted as "cheerleaders" for the executive's views.

12/29/14 Ex-Bank chief Mervyn King says financial system still weak: 

Mervyn King, at the helm of the Bank of England throughout the financial crisis, has said the banking system may not survive another crisis.  "I don't think we're yet at the point where we can be confident that the banking system would be entirely safe," he told Radio 4's Today programme.  His warning comes despite rules forcing banks to hold more funds to guard against the risk of a future downturn.  "I don't think we've really yet got to the heart of what went wrong," he said.  Lord King, who retired 18 months ago, said the problem of imbalances between different economies globally had not yet been solved.

12/2015 No more #LIBOR or manipulation of key benchmarks....except "Libor Oversight Chief Was Forced Out"

The chairwoman of a committee overseeing an interest-rate benchmark at the center of a global scandal was forced out of her post after a disagreement over greater independence from the company that runs the process, according to people familiar with the matter.  Joanna Perkins, a financial lawyer who has advised regulators, left the committee in July. The company, London- based Ice Benchmark Administration, a unit of Intercontinental Exchange Inc., at the time gave no explanation for the change. According to people familiar with the matter, Ms. Perkins left after months of tension with Finbarr Hutcheson, the chief executive of IBA. Among other things, the two disagreed about how involved the committee should be in reforming Libor, said two of these people, and whether the IBA was shutting her out of important meetings with regulators. In July, Ms. Perkins was asked to step down by IBA Chairman Andre Villeneuve.



11/1/14 Keiser Report: Naughty Banking Boys - Crimes Today and Suicide Bankers  - Nothing is being Done.
For Years Banksters have Rigged the Libor Rates!! There will NEVER BE LAW AND ORDER!!!

NYSE Euronext to Take Over Administration of Libor From BBA
Britain will hand over administration of the London interbank offered rate to the operator of the New York Stock Exchange as regulators try to revive confidence in the scandal-hit benchmark.

Libor was first published by the BBA in 1986, the year the British Prime Minister’s “Big Bang” program of deregulation fueled a boom in London’s bond and syndicated-loan markets. Originally intended to be a simple benchmark that borrowers and lenders could use to price loans, the rate grew in importance as it was adopted as the basis for setting interest rates from mortgages and student loans to derivatives. The BBA, whose members are among the world’s largest banks including those who contribute to Libor, was criticised by policy makers in the U.K. and the U.S. for failing to address concerns about the rate-setting process first raised by then New York Fed President Timothy F. Geithner in 2008.

NYSE Euronext (NYX)will replace the British Bankers’ Association as Libor’s administrator in early 2014, the London-based lobby group that started the benchmark more than two decades ago said in a statement today. The U.K.’s Financial Conduct Authority began regulating Libor, the benchmark for more than $300 trillion of securities, in April as part of the overhaul.

The New York-based purchaser already operates Liffe, Europe’s second-largest derivatives exchange, which offers derivatives based on Libor. A government review recommended last year that the BBA should be stripped of responsibility for Libor after regulators found banks had tried to manipulate it to profit from bets on derivatives.

"The fact they are handing this to a derivatives exchange is a surprise," Peter Lenardos, a financials and exchange analyst at RBC Capital Markets in London, said by telephone today. "It just doesn’t seem independent enough. They are taking the setting of Libor from the banks and giving it to an exchange not known as a benchmark provider."

Barclays Plc (BARC), UBS AG (UBSN) and Royal Bank of Scotland Group Plc (RBS) have been fined more than $2.5 billion by U.S. and U.K. regulators for rate-rigging, and more than a dozen more firms are being probed worldwide.

Under rules introduced by the FCA, the administrators of the rate and banks that participate will have to appoint a person approved by the regulator to oversee compliance. The BBA has also stopped quoting Libor for two currencies and eight maturities in a bid to make the benchmark less vulnerable to manipulation.“Restoring confidence in Libor has been an absolute priority for the BBA," Anthony Browne, CEO of the lobby group, said in a statement. “We have been working hard with regulatory authorities and the Government to put in place much-needed reforms to the system.” Bloomberg LP, the parent of Bloomberg News, has proposed an alternative to Libor dubbed the Bloomberg Interbank Offered Rate, or Blibor. It would use data from a variety of financial transactions to reflect participating banks’ cost of credit. James Dunseath, a spokesman for NYSE in London, declined to comment. Officials at the BBA and Treasury also declined to comment. IntercontinentalExchange Inc. is in the process of acquiring NYSE Euronext.




Two British bankers have been convicted by a New York jury of manipulating inter-bank lending rates. Anthony Allen and Anthony Conti were charged with conspiracy to commit wire and bank fraud and committing wire fraud, by misreporting the London interbank offered rate (Libor) as it related to the US dollar. Both worked for Dutch lender Rabobank. The US Department of Justice reached a deal with Rabobank in October 2013 for $1bn (£657m) over its role in manipulating Libor. This was the first conviction of traders involved in the scandal in the US. 2015

Judge Jeremy Cooke told the jury that the central decision they had to make was whether Hayes had acted dishonestly "by the standards of reasonable, honest members of society". "Not by the standards of the market in which he operated, if different (from those of reasonable and honest people). Not by the standards of his employers or colleagues, if different. Not by the standards of bankers or brokers in that market ... even if many or even all regarded it as acceptable," the judge said. "Do not concern yourself with others who may or may not be prosecuted, whether or not there was or was not a more general endemic problem in the market at the time of which they were or were not part," he added.

Libor rigging scandal: Tom Hayes admits he tried to be charged in the UK to avoid extradition 
FOUND GUILTY  of eight counts of conspiracy to fix the international interbank lending rate sentenced to 14 years in jail.

Libor rate rigger Tom Hayes said he admitted to wrongdoing and dishonesty to avoid extradition to the US, a court heard on Tuesday 7 July. Hayes, 35, a former trader at UBS and Citigroup, admitted he tried to get charged by British prosecutors, which was the only reason he cooperated with the UK's Serious Fraud Office. Several trillion dollars of loans, mortgages and other deals are tied to the Libor rate worldwide. The Serious Fraud Office alleges that Mr Hayes, from Fleet, Hampshire, corralled and bribed traders across 10 lenders into manipulating the rate for a profit. Mr Hayes' defence was that he was open about trying to fix rates and that his managers were aware of, and approved of, the practice. He is the first trader to stand trial in a global investigation into the rigging scandal. Hayes also said that management knew about his actions and he did not know he was doing anything wrong. He told the court: "I acted with complete transparency... My managers knew, my manager's manager knew. In some cases the CEO [chief executive] was aware of it." Motivated by greed and a desire for higher pay, the court heard that Hayes set up a network of brokers and traders that spanned 10 of the world’s most powerful financial institutions, cajoling and at times bribing them to help rig rates – designed to reflect the cost of interbank borrowing – for profit. Hayes would then place large bets on financial markets that were sensitive to Libor moves.  The former trader, who was diagnosed with mild Asperger syndrome just before his trial began, said he was transparent about trying to influence rates and his managers were aware. Hayes claimed he was taking part in an “industry-wide” practice. He described the broking market he worked in as the wild west, a place with no rules and where relationships relied on lavish entertainment. He said it was this high-pressure environment which took its toll on him, prompting him to threaten brokers and pick fights with colleagues to move interest rates to aid his trading.

Tom Hayes schooled brokers and traders on how to downplay requests to manipulate Libor as scrutiny of the benchmark rate intensified in 2010 after he joined Citigroup Inc., according to e-mails and messages at a trial in London. "Just have a quiet word with" the rate-setter, Hayes told his co-worker at the U.S. bank. "Make sure not to put it in writing." A half dozen former brokers from ICAP Plc, RP Martin Holdings Ltd. and Tullett Prebon Plc are on trial for a conspiracy to defraud. The men, who deny the charges, are accused of helping Hayes rig the London interbank offered rate, a benchmark used to value more than $350 trillion of loans and securities.

Citigroup Promotes Banker Who Hayes Said Knew of Libor Rigging Citigroup Inc. promoted an executive who Tom Hayes, a former colleague who is now a convicted felon, has repeatedly said was aware of Libor manipulation. Ex-Citigroup and UBS Group AG derivatives trader Hayes, who was sentenced to 14 years in jail for conspiracy to rig yen Libor in August, testified during his trial that McCappin knew about his attempts to move the London interbank offered rate. McCappin, who was chief executive officer of Citigroup’s Japanese investment bank at the time, hasn’t been accused of wrongdoing by prosecutors.

UBS Gave Out ‘Instruction Manual on Fixing Libor,’ Hayes Said - Jurors in London court hears how Hayes manipulated Libor
The Swiss bank’s e-mailed “Guide to Publishing Libor Rates,” which was shown to jurors by prosecutors in London Thursday, included an instruction for traders to adjust their submissions depending on their “delta/fixing position.” “If 3m Libor” exposure “is 4,125 this means we are receiving” and “therefore we want to increase the fixing by 25 basis points,” according to the internal UBS guide. “If the number is negative then vice-versa.”

1/21/15 MPs raise suspicions over Bank of England forex report
Treasury Committee questions whether Bank official Martin Mallett deserved greater criticism for failing to raise alarm. The report detailed an October 2011 phone call to Mr Mallett, in which a trader raised concerns about foreign exchange transactions. At one point in the discussion, Mr Mallett said: “Well, that’s market manipulation isn’t it?” and the trader replied: “Yep, absolutely.”

5/23/2015 Deutsche Bank, Germany’s biggest bank, is poised to settle U.S. and U.K. investigations into the rigging of benchmark interest rates for about EU2B. Litigation will cost 1.5 BILLION EUROS and the penalty expected to be paid is also1.5 BILLION EUROS!

UBS bosses told staff to rig rates

6/23/15 Hayes said brokers "a tool in my armoury" in Libor rigging & that ex boss Mike Pieri aware of sweeteners. The former UBS and Citigroup trader, on trial at Southwark Crown Court, also told investigators from Britain's Serious Fraud Office (SFO) that market abuse had been rife and that senior UBS managers must have known what was going on. #UBS management used Libor to lie about cost of borrowing by 50-100 bps & portray a sense of strength

Swiss lender UBS AG made a whistleblower deal with Brazilian authorities investigating the suspected rigging of Brazil's currency market and will receive no punishment in the case, a local newspaper reported on Friday.  The investigation, which involves 15 of the world's largest banks, began following the presentation of evidence by UBS, Valor Economico reported, without naming its sources.  A UBS press representative did not immediately respond to a request for comment.  In a document released Thursday, antitrust watchdog Cade alleged the banks colluded to influence benchmark currency rates in Brazil by aligning positions and pushing transactions in a way that deterred competitors from the market between 2007 and 2013, at least. Foreign exchange trading in Brazil is estimated at about $3 trillion a year, excluding swaps and derivative transactions.  The banks named in the Cade probe are Bank of America Merrill Lynch, Bank of Tokyo-Mitsubishi UFJ, Barclays Plc, Citigroup Inc, Credit Suisse Group AG, Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase & Co, Morgan Stanley, Nomura Holdings Inc, Royal Bank of Canada, Royal Bank of Scotland Group, Standard Bank Group Ltd, Standard Chartered Plc and UBS.


Bank of England official received emails related to Libor rigging, court told

A senior Bank of England official nicknamed The Hammer was sent emails that, it is claimed, played a key role in the rigging of lending rates between banks, according to evidence presented in the first criminal trial in the Libor scandal. Martin Mallett was the Bank’s chief currency dealer until he was fired last November for serious misconduct. In 2007, along with traders at big-name banks including Barclays, Lloyds and BNP Paribas, he was copied into emails that were used to skew Libor, a jury has heard.

The claim was made at the trial of Tom Hayes, 35, a dealer in Japanese yen derivatives at the Swiss bank UBS and then the US firm Citigroup, where the prosecution claim he earned £4.8m over a four-year period after attempting to rig Libor – the London interbank offered rate – on an almost daily basis.

The jury at Southwark crown court also heard Hayes attempted to recruit his stepbrother, then a junior employee at HSBC, into the alleged scam. They were shown evidence of collusion with traders at JP Morgan Chase, Royal Bank of Scotland, Hayes’ own bank UBS, as well as two brokerage firms, which in turn applied pressure to other banks including France’s Société Générale.

The emails seen by Mallett were written by an employee at a brokerage firm that Hayes is said to have conspired with. They contained daily forecasts of the interest rates charged between banks for lending in Japan’s yen currency. Hayes placed huge bets on these rates, in contracts that could win or lose him hundreds of thousands of pounds, depending on fractional movements in Libor.

Libor is set by taking the average from a designated panel of 16 top banks, and the forecasts sent out in daily alerts by the broker were intended to inform rate submitters at the panel banks. Mallett was copied in using his email address. There was no suggestion Mallett knew of, or was involved, in any manipulation. The Bank of England declined to comment, saying: “In line with convention followed by public bodies, where precedence to criminal trials is afforded wherever possible, it would be inappropriate for the Bank to comment on an active criminal proceeding.” The prosecution claimed Hayes pushed big fees through the brokerage firm issuing the alerts, in return for being able to influence thier contents. QC Mukul Chawla showed evidence of how some emails were rewritten and re-issued on certain days to suit Hayes.

On 22 February 2007, the trader sent out his forecasts before stock markets opened. In an internal message not seen by Mallett or those on the mailing list for the daily alerts, a colleague then requested a change, saying: “Can you get 1mos [1 month Libor] and 3mos [3 month Libor] lower please? ... I’m sure you know if you could resend the run out it would be a big help ... UBS said he will try and do a deal with me to pay you!” The alert was resent later that morning, showing higher forecast rates. “This is scratch my back and I’ll scratch yours,” said Chawla. “What he is doing is ... sending out to all of these people his revision. It is not a revision based on anything genuine, it is a revision based on Mr Hayes’ needs ... ”

The trader wanted a financial reward for altering his forecasts, the jury heard. They were shown other internal emails in which he requested payments: “ It seems to me he has all this glory and u guys get his support in other things. I get the drib and drabs ... How about some form of performance bonus per quarter from your bonus pool for me for the libor service?” His colleague replied: “I would suggest a lunch ... As for kick backs etc we can discuss that at lunch and I will speak to Tom about it next time he comes up for a chat”.

In a later email, another promise is given: “If the needs be I will look into it on a bigger scale eg your salary package”. The court has ordered news media covering the trial not to reveal the identities of the brokers and their employers. In April 2007, Hayes began emailing and instant messaging his step brother, Peter O’Leary, then employed by HSBC, which was a panel bank for Japanese yen Libor. Hayes asked his brother if he knew the individual responsible for submitting HSBC’s rates. The jury heard he also asked if O’Leary could pass on a message: “If you see him you say ‘If you can set a low yen 3 month Libor you will really help my brother out’.”

During a later conversation with his brother, Hayes had a change of heart. “I don’t think I’m going to bother asking for your help on the Libors again because ... I don’t want to put you in that position, it’s wrong of me to ask you.” Not all of Hayes’ claimed attempts to pressure other traders succeeded. After initially fruitful exchanges, Hayes received the following email from a trader at JP Morgan Chase, whose rate setter were not cooperating. It read: “unfortunately they have gone all, “we need to be independent,” on us … so unfortunately nothing much I can do for a while”.

Chawla said it was clear from the evidence that Hayes was not the only one aiming to manipulate rates. “There are many others who are manipulating. But just because there are many doesn't make it fundamentally right to do this.”



3/6/15 How did it all go so horribly wrong for #RBS?
RBS, which was founded in 1707 and invented the "overdraft" in 1728, saw this as an opportunity to compete with the banking giants across the globe. It wanted to branch out from the high street, to Wall Street. It is an epic, global retreat from investment banking worldwide. If RBS's investment unit was a standalone investment bank, it would be regarded as a spectacular collapse. For comparison, Lehman Bros employed a similar number of bankers. When Lehman imploded in 2008 — an event that triggered a worldwide recession — it had 26,000 staffers.   The RBS collapse did not come suddenly. The rot inside the 300-year old lender started three decades ago. From the deregulation of the banking sector between 1979 and 1983 under Margaret Thatcher. The Banking Act of 1979, under the rule of Conservative prime minister Margaret Thatcher, removed capital controls and allowed banks to more freely acquire and takeover other lenders.  That meant any bank would be able to move away from vanilla retail products to offering services, such as investment banking, investment management and other forms of consumer credit.

Shredded: Inside RBS, The Bank That Broke Britain

Article on report by Treasury Committee on RBS bank misconduct

2/4/15 JPMorgan to pay $99.5 million to resolve currency rigging lawsuit



10/2/14 Lloyds bank fraudsters walk away again without any criminal convictions! by Rowan Bosworth-Davies

Eight managers and traders at Lloyds Banking Group have walked away from their jobs in the bank after having been disciplined for their part in the Libor rigging fraud! Lloyds said that the eight who were suspended on or before July 28th when the bank was fined £220 million for the offences, had been disciplined and let go.

The offences concerned took place between 2006 and 2009. The bank has also been fined and censured by the US Justice Department and the US Commodity Futures Trading Commission. There are on-going investigations at the SFO into Libor rigging charges. These, are the basic facts of the outcome of the case, but they do not in any way amplify the dishonesty, the criminality and the illegality of the whole event, nor do they explain why no criminal charges have been brought against any of those disciplined by Lloyds. Yet again, examples of blatant City criminal wrong-doing are allowed to be dealt with by way of dismissal, oh and a loss of any unvested bonuses.

When the Libor scandal first broke, there was a lot of panicky blather from Ministers and City Grandees about the apparently difficult fact that there were no criminal charges available to bring against any of the employees involved in the criminal activity. Yet again, the old chestnut about not using criminal charges for City crimes was trotted out, the supposed difficulty in getting juries to understand the complexity of the facts of the charges, the costs of prosecution, etc, etc.

The arrogance and the elitist posturing of the financial regulator was thrown clearly into perspective by their refusal to bring criminal charges against any of the persons involved. Far from there being no criminal charges available to cover the kind of activity being criminally engaged in, there was a perfectly good, and very flexible charge available to prosecutors under Section 17 Theft Act 1968, the offence of False Accounting.

The offence states, inter alia;

(1) Where a person dishonestly, with a view to gain for himself or another or with intent to cause loss to another,—

(a) destroys, defaces, conceals or falsifies any account or any record or document made or required for any accounting purpose; or

(b) in furnishing information for any purpose produces or makes use of any account, or any such record or document as aforesaid, which to his knowledge is or may be misleading, false or deceptive in a material particular;

he shall, on conviction on indictment, be liable to imprisonment for a term not exceeding seven years.

(2) For purposes of this section a person who makes or concurs in making in an account or other document an entry which is or may be misleading, false or deceptive in a material particular, or who omits or concurs in omitting a material particular from an account or other document, is to be treated as falsifying the account or document.

False accounting is a charge which I used with significant regularity when I was a detective at the Fraud Squad! It is, as I said, a very flexible piece of legislation and it can be used to punish a multitude of sins. The offence revolves around the concept of the falsification of an 'account, record or document required for an accounting purpose.

The Libor benchmarking apparatus is just such a record. It sets a global standard for the purposes of calculating interest rates, and where any person manipulates or concurs or conspires in manipulating that record for their own benefit, the offence of false accounting is complete. I couldn't understand at the time, why any number of people were not charged, almost immediately with the offence, and taken to court. It is not as if there was any doubt about their actions, most of them were recorded on tapes engineering their various scams and fiddles, so why were these charges not immediately brought? Well, therein lies the real conundrum that lies at the heart of this shameful exercise.

First of all, who stood to gain?

Well, the traders did, that was certain, they were obtaining assistance in closing unfortunate derivative of trading positions at either a profit, or at least not at a loss, so there was a criminal gain in both directions. They were also making upside profits from manipulating the Libor benchmark. These profits were of course benefiting their institution, and helping the dealers make their numbers and thus helping to generate their bonuses. But their employing institutions were benefiting as well, making profits from these illicit activities. So the desk managers and the team managers and the division managers all had some skin in the game because they were all benefiting from the profits these traders were generating. Ultimately, of course, the bank was benefiting as well as the illicit profits were being generated. I find it almost incredible to accept that no-one on the fifth floor, not one director, when reading the balance sheets and the bank's divisional P&L sheets, did not say to a friend or Board colleague;

"...We seem to be doing awfully well down on the trading desks these days!"

Well, it may well be that management didn't want to know too much about the source and provenance of profits, for fear that they might have been required to look a little more closely into their source!

The most logical explanation for the inaction of the managers of these institutions to have done anything between 2009 and 2014 about the actions of these errant traders and managers, is because they did not know how deeply within the fabric of the bank the rot might have been allowed to permeate. Rather than take what might appear to be precipitate action at the time, better to sit still and do nothing until such time as the end game had become inevitable, and then take whatever action they could. In the interim period, some of the more egregious employees might have left anyway, and there would be fewer sackings to worry about.

This explains, certainly in my opinion, why nothing appears to have been done by the institutions in the interim period. They simply couldn't calculate the damage that might have been occasioned, and no-one wanted to make any damaging moves without knowing what positions the regulators would take. The FCA, not exactly a fast mover in these and similar circumstances, took a long time to bring disciplinary actions, which gave the banks the signal of when and how to act!

One might also ask why the Compliance Department was not asking any questions about the source of these profits. It is not as if the knowledge of the Libor fiddles were exactly unknown within the institutions themselves.

One compliance officer I know said to me once that it was not a great career move to question the source and provenance of profitable business, particularly when the firm was making a lot of money.

But that is to miss the point. It is just as important for the Compliance Department to know the source of unexpected profits their firms are experiencing and to adopt a pro-active approach towards understanding the source of such earnings, because they know, or should know that the average trader does not bother to debate the legality of their actions, as the Libor episode has demonstrated so well!

This led me into thinking about the level of knowledge of the criminal law possessed by the average compliance officer, and it is surprisingly low.

Even those who are legally qualified rarely remember much about their criminal law studies. That is because most law students are not really interested in criminal law, a subject that most of them study in their first year, and then on a most superficial level, doing just enough to scrape through the criminal law paper in the exams. They do not expect to have to use this subject ever again, (very few lawyers ever want to practise criminal law - there is no money in it), so they do not revise or refresh their memory on the topic.

Yet so much of the activities of those whom the compliance officer is called to supervise, is engaged with acts of pure criminality, theft, fraud, bribery, corruption, tax evasion etc.

If we have a control regime that is so blissfully unaware of the nature and content of the criminal law, and particularly as it applies to market participants, can we be surprised when they do not apply the provisions of the relevant criminal statutes, at times when they should be required to do so.

This again demonstrates the level of 'shamateurism' which marks out much of our approach to financial regulation, and demonstrates, yet again, how city practitioners and particularly bankers, are treated as a protected species!

Those Lloyds Bank employees who have engaged in wholesale manipulation of the Libor benchmark, have committed wholesale criminal offences. However, because of their status they have been allowed to walk away from the consequences of their actions, without any convictions to mark their dishonesty.

Some practitioners are saying that the loss of their bonuses is a big enough punishment, but that is a meaningless and ridiculous statement. Such bonuses represent, certainly in part, the proceeds of crime, and can therefore never be lawfully owned by the perpetrators. Indeed, any retention by them of any part of these bonuses could amount to a further offence of money laundering, but you would need to know the criminal law to understand that!



3/9/15 Newsweek UK's Serious Fraud Office Grills Traders Over Europe-Wide Rate Fixing Scandal [full coverage]

The Euribor rate is a Brussels equivalent of Libor and is a key borrowing benchmark. It is set according to calculated submissions by a panel of 25 banks (previously 45 in 2012) from across the European Union.
Former traders from Barclays and Deutsche Bank have been called in for questioning as part of a UK Serious Fraud Office criminal probe into the suspected rigging of the Euribor rate.  The criminal investigation was launched in 2012 to address the alleged manipulation of Libor (the London interbank offered rate) and other related interest rates and receives special government funding from the UK Treasury. Barclays have already paid a record £290 million following civil investigations by UK and U.S. authorities.