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By John Cassels and Daniel Geey
Details emerged this week of the activities and communications of some of the traders implicated in the global LIBOR investigations. The European Commission, Serious Fraud Office (SFO) and US Department of Justice (DoJ) have been at the enforcement forefront with various criminal and civil actions ongoing.
Libor rates are used to determine the value of various global financial products. The rate is based on a set of panel banks submitting the interest rate that they would expect to be charged by another bank over various timeframes (i.e. 3, 6 or 12 months). The Libor is formed by removing the highest/lowest submissions and averaging the rest. Various individuals were charged with directly or indirectly manipulating the submission rates. By influencing enough of the individuals, it is claimed it pushed the Libor rate in different directions for the benefit of certain trades.
Documents already in the public domain highlight a number of compliance lessons. These are:
This investigation clearly demonstrates that behaviours that start out as relatively innocuous can unravel so spectacularly without robust compliance and risk management procedures in place. Effective compliance and warning systems should be at the forefront for any company's strategic, operational and reputational thinking. Get your compliance processes in place, and guess what; we can help.
If you would like to discuss these issues, please do not hesitate to contact John Cassels at email@example.com or Daniel Geey at firstname.lastname@example.org.
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