Courtesy of Pam Martens
Jamie Dimon, Chairman and CEO of JPMorgan Chase, Testifying Before Congress on the London Whale Trading Losses
Two U.S. and three foreign banks have been charged with rigging the foreign exchange market where $5.3 trillion changes hands daily and have settled civil claims for $3.3 billion. (The charges are very similar to those in the rigging of the international interest rate benchmark known as Libor.) Additional charges and settlements by other regulators are expected to follow before the end of the year.
The U.S.-based Commodity Futures Trading Commission (CFTC) levied a total of over $1.4 billion in fines against JPMorgan, Citigroup, UBS, HSBC and RBS. The same five banks were fined $1.7 billion by the U.K.’s Financial Conduct Authority (FCA). Swiss regulator FINMA charged only UBS with a fine of $139 million and included rigging of precious metals trading along with rigging foreign exchange.
While the details that were released are skimpy and the Financial Conduct Authority is already being criticized in London for essentially allowing the banks’ lawyers to conduct their own investigations and hand over their findings to the regulator, no bank comes out looking worse than JPMorgan – which has serially promised to beef up its internal controls and compliance while serially being charged with ongoing, serious crimes.
The FCA said the foreign exchange market rigging occurred between January 1, 2008 through October 15, 2013 while the CFTC fines and investigation covered a shorter period from 2010 through 2012, according to documents released by the regulators this morning. The important takeaway from these dates is that the corrupt banking culture that crashed global economies in 2008, and then received taxpayer bailouts to resurrect these same institutions, still poses a serious financial threat to investors and taxpayers.
Both the U.S. and U.K. regulators faulted JPMorgan for inadequate internal controls and supervisory failures. The CFTC wrote that JPMorgan “lacked adequate internal controls in order to prevent its FX traders from engaging in improper communications with certain FX traders at other banks. JPMC lacked sufficient policies, procedures and training specifically governing participation in trading around the FX benchmarks rates and had inadequate policies pertaining to, or insufficient oversight of, its FX traders’ use of chat rooms or other electronic messaging.”
