CFTC Obtains $325 Million Penalty to Settle LIBOR Case against the Royal Bank of Scotland and RBS Securities Japan Limited

In the Matter of The Royal Bank of Scotland plc and RBS Securities Japan Limited, CFTC Docket No. 13-14.  On February 6, 2013, the CFTC announced it issued a settled Order against the Royal Bank of Scotland and RBS Securities Japan related to the alleged manipulation, attempted manipulation, and false reporting relating to LIBOR for Yen and Swiss Franc.  The CFTC Order imposes on RBS a $325 million civil monetary penalty.  It also orders RBS to cease and desist from further violations as charged, and engage in undertakings to ensure the integrity and reliability of LIBOR submissions, including improving internal controls.  According to the Order, RBS traders would ask colleagues to make false LIBOR submissions that were beneficial to RBS’s trading positions. The requests were either for falsely high submissions or falsely low ones, depending on what was required to make profits.  In addition, RBS facilitated price manipulation by placing derivatives traders and LIBOR submitters together on the same desk, creating an inherent conflict of interest between the profit motives of the traders and the responsibility of submitters to make honest submissions.  According to the Order, RBS derivatives traders also worked with other traders in attempts to manipulate Yen LIBOR and Swiss Franc LIBOR.  RBS also aided and abetted attempts to manipulate Yen LIBOR by executing wash trades to generate extra brokerage commissions to compensate brokers for assisting in the misconduct.

In related actions by the U.S. Department of Justice, RBS Securities Japan Limited agreed to plead guilty to a criminal charge of wire fraud, The Royal Bank of Scotland plc entered into a deferred prosecution agreement whereby it would continue to cooperate with the U.S. Department of Justice in exchange for the deferral of criminal wire fraud and antitrust charges, and RBS collectively accepted a penalty of $150 million. In addition, the United Kingdom Financial Services Authority (FSA) issued a Final Notice regarding its enforcement action against The Royal Bank of Scotland plc and imposed a penalty of £87.5 million, the equivalent of approximately $137 million.

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