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#Financial Crime Prevention

Financial crime: Views on the news

International Compliance Association

Bank of England , Barclays , Financial , financial crime , LIBOR , US

LIBOR, conspiracy to defraud, the Bank of England, Barclays, Qatar, dual criminality and some other observations…….

All six traders in the LIBOR affair were recently cleared following their trials for conspiracy to defraud. Tom Hayes, the only trader in the UK to be found guilty for the same charge, is currently serving 11 years, reduced from 14 on appeal. Tom Hayes’ father commented: ‘Tom is bewildered that he is now in a situation where he has been convicted of conspiring with nobody.’

So is there more to it than meets the eye in this story? Let’s have a look at some of the wider inferences.

The difficulty of securing a conviction for fraud offences remains, as this case demonstrates, with the jury having to assess beyond a reasonable doubt whether the six traders had acted dishonestly.

Extradition to the US

In the Hayes case, he had admitted dishonesty in interviews with the Serious Fraud Office (SFO). In one extract read out in court, Mr Hayes said: ‘Yes, I admit I was dishonest and was dishonest within an environment that was prevalent among all the banks.’

So at this point he was sure to be convicted under the Ghosh test – which applies for both the Fraud Act 2006 and the common law offence of conspiracy to defraud. He also told his trial that he had acted as he did because he wanted to be charged in Britain to avoid extradition to the US and a potentially lengthy jail sentence, while adding: ‘I didn’t think about innocence or guilt’.

There have also been reports that suggest that Mr Hayes’ sentence was reduced on appeal to 11 years on the basis that he was junior in his position with his bank and the fact that he had a form of Asperger’s. However, also note that he was reportedly earning £2 million a year – which may not seem a salary commensurate with a ‘junior role’.

Meanwhile, UK traders Anthony Allen and Anthony Conti, who were convicted last year of fraud and conspiracy to commit fraud in the US, potentially face 30 years in jail at a sentencing hearing scheduled for 10 March. They were indicted in October 2014 in relation to ‘their participation in a scheme to manipulate’ the US dollar and yen LIBOR rates. So that’s the LIBOR scandal continuing to make headlines from the traders who were involved.

Bank of England

But there is another side too – something people do not discuss often – available in public transcripts from the Treasury Select Committee files. This is the potential pressure the Bank of England put on Barclays to lower its LIBOR submissions, a suggestion robustly¬ rejected by the Bank of England.

This issue may rear its head again in a different, but not entirely unrelated, matter. Just days ago, it was revealed that Barclays is being sued by financier Amanda Staveley for £700 million in connection with its emergency fundraising in 2008, with respect to loans from Qatar. The SFO has been conducting an investigation in relation to this for some time too.

When the fallout from LIBOR – and we haven’t mentioned the fines levied by the Financial Conduct Authority and other regulators – and related issues will eventually end is difficult to predict. But, at the risk of mangling the odd metaphor, it seems a fairly safe bet that this particular can of worms will rumble on a while longer.

Dual criminality

In another twist on the extradition angle, trader Navinder Sarao is awaiting the ruling of an English court on whether he can be extradited to the US to charges relating to market manipulation, including through spoofing – placing orders to give the impression of an intention to buy or sell shares, then cancelling or amending them in order to make a profit. The US argue that his actions helped to bring about the 2010 Wall Street flash crash.

Mr Sarao’s lawyers argued earlier this month that Mr Sarao had committed no offence in English law and so the dual criminality argument – that someone’s actions are a crime in both the country seeking extradition and the country being asked to extradite them – did not apply. The court will give its ruling next month.

 

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