US DOJ confirms criminal investigation into Forex manipulation

Financial System Forex

Just days after major Forex banks such as Deutche Bank, Rabobank, and others "The Usual Suspects" have been fined billions for a Libor fixing scandal, the US Department of Justice officially announced a criminal investigation into the fixing of Forex rates.

Oct 29 (Reuters) - The U.S. Justice Department is investigating the manipulation of foreign exchange rates, a top federal prosecutor said on Tuesday, in the first public acknowledgement of such a probe in the United States.

Criminal and antitrust authorities have an "active, ongoing investigation" into the possible manipulation, Mythili Raman, the acting head of the department's criminal division, said.

The confirmation comes on the same day Dutch bank Rabobank agreed to pay more than $1 billion to resolve allegations that it manipulated Libor and other benchmark rates. And other European banks that face related probes disclosed they set aside major sums to cover legal costs.

Over the past two years, regulators and prosecutors have extracted billions in fines from global banks after finding that they rigged Libor, the average rate at which a panel of banks expects to borrow money.

The Libor rates have been susceptible to manipulation because they are based not on specific transactions, but on a survey of where banks think they can borrow.

As a result, authorities have turned to other benchmarks, including those that undergird the $5.3 trillion-a-day currency market, to investigate whether they are open to similar kinds of skewing.

Regulators in Switzerland, the United Kingdom, and Hong Kong said earlier this month they were investigating the conduct in currency markets.

Deutche Bank has confirmed it is cooperating with requests for information.  This news comes out within 24 hours of DB announcing a record profit loss of 94% due to a charge of $1.2 Billion Euro, which should cover costs involved in Libor scandal.

Deutsche Bank AG (DBK), Europe’s largest investment bank by revenue, said third-quarter profit slid 94 percent after it set aside 1.2 billion euros ($1.65 billion) to cover potential legal costs and income from debt trading fell.

Net income in the three months through September dropped to 41 million euros from 747 million euros in the year-earlier period, the Frankfurt-based bank said in a statement on its website today. That missed the 430 million-euro average estimate of 12 analysts surveyed by Bloomberg.



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