HSBC to pay $100m in currency rigging settlement

Jon Howard
January 20, 2018

John Cronan, acting assistant attorney general at the U.S. Justice Department, said the bank misused confidential client information for its own profit on more than one occasion.

A spokesman for HSBC said: "HSBC is committed to ensuring fair outcomes for its customers and protecting the orderly and transparent operation of the markets".

In what has been a long and tumultuous investigation and corresponding prosecution, HSBC has finally reached settlement with the US Department of Justice, over violations of foreign exchange rigging, conducted by two former employees of the bank. Johnson and his former colleague Stuart Scott, HSBC's European head of foreign exchange trading in London until December 2014, allegedly pocketed $3m in profit and also billed their client $5m in fees for their work.

Front-running typically involves a trader jumping ahead of a client's order, buying or selling for their own account to profit when the larger transaction moves a price.

The traders then caused the large transactions "to be executed in a manner created to drive the price of the pound Sterling in a direction that benefited HSBC, and harmed their clients".

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The settlement included $38.4m (£27.5) in restitution and a $63.1m (£45.2) fine, reflecting a 15 per cent reduction in recognition of the bank's cooperation during the investigation and its "extensive remediation", HSBC said in a statement today (19 January).

The deal with HSBC is also dependent on the bank bolstering its internal controls. HSBC previously settled with one of its victims, paying $8 million to Cairn Energy. HSBC did not receive credit for voluntarily disclosing the misconduct.

The investigation centred on HSBC's foreign exchange (FX) traders who misused confidential client information in 2010 and 2011 during multibillion-dollar FX transactions.

In connection with the government's investigation, Mark Johnson was charged on August 16, 2016 with one count of conspiracy to commit wire fraud as well as 10 counts of wire fraud stemming from the Cairn Energy transaction. His sentencing is scheduled for February 15. The U.S. Attorney's Office for the Eastern District of NY and the Criminal Division's Office of International Affairs provided significant support.

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