Barclays Joins Citi to Assist With South Africa Forex Trading Probe

South Africa’s Competition Commission is set to receive important information from Barclays Plc and Citigroup concerning accusations that a number of banks had colluded to rig the exchange rate of the Rand. There have been concerns that more than a dozen South African and foreign banks had worked together to fix the currency’s exchange value vis-à-vis the US Dollar.

According to reliable sources, traders based in Johannesburg and New York are believed to have used the Reuters trading platform to fix the exchange rate of the Rand. These rogue traders are believed to have made use of an online chat room on Bloomberg known as ZAR Domination to discuss the quotes to be given to customers eager to trade in the Rand. The traders are also believed to have coordinated trading times in order to get the most suitable deals at the expense of their customers.

This issue has been the subject of a probe by anti-trust authorities that started in April 2015. Traders in many countries have been snared as a result of a worldwide crackdown on the widespread practice of rigging forex benchmarks as well as interest rates. As a matter of fact, many traders caught doing this have been fired and banks have collectively been fined more than $10 billion. Jacob Zuma, the President of South Africa, has also weighed in on the issue, asking for action to be taken against market abuse.

The Competition Commission is eager to take strict action against banks and individuals found guilty of wrongdoing as part of this alleged cartel. In fact, it has recommended fining the banks 10% of their annual revenues generated in South Africa. The findings of the commission will be adjudicated by South Africa’s Competition Tribunal.

According to a couple of reliable sources who choose to remain unnamed because the matter is still under investigation, Barclays and Citigroup have co-operated with the investigation so far. While Barclays recently released a statement to this effect, Citibank did not offer any comment on the issue. There is a chance that both companies will be able to avoid being fined if the information they provide the investigation comes in use to successfully prosecute some of the perpetrators of this scam. As a matter of fact, neither company features in the list of banking companies that are slated to be fined even though the Commission says that they were part of the alleged rigging cartel.

It is clear that investigators are offering leniency for companies in exchange for cooperation even though the other companies would be fined to the maximum extent. Even so, it has to be pointed out that the two companies might not have complete protection against punishment in spite of their early involvement with the commission. While regulators aren’t planning to pursue any action against the traders themselves, they are likely to suggest that banks change their incentive system that clearly encourages traders to try out illegal activities.

The companies whose actions are currently being investigated by the Competition Commission are Credit Suisse Group, Nomura, Investec, Standard Bank, BNP Paribas, JP Morgan, Standard New York Securities Inc, ANZ Banking Group Ltd, Macquarie Bank, Commerzbank AG, Bank of America Merrill Lynch and Standard Chartered Plc.

Investec, one of the companies embroiled in the issue pointed out that only one of its traders was named in the case. The Anglo-South African company said that it had requested the Competition Commission for more information about the charges before it would consider co-operating with the inquiry. None of the other companies had a comment on the ongoing issue. While some declined to comment, others were not available.