On May 24, the New York Department of Financial Services (NYDFS) announced that it had assessed a $350 million fine against a global bank and its New York branch (Bank) as part of a consent order addressing allegations that the Bank’s foreign-exchange business had engaged in long-term violations of New York banking law. According to the announcement, NYDFS investigated alleged misconduct occurring between 2007 to 2013 and found the improper conduct “included collusive activity by foreign exchange traders to manipulate foreign exchange currency prices and foreign exchange benchmark rates; executing fake trades to influence the exchange rates of emerging market currencies; and improperly sharing confidential customer information with traders at other large banks.” Specifically, the violations include the following:

  • collusion through on-line chat rooms to manipulate securities prices and artificially increase profits;
  • improperly exchanging information about past and impending customer trades, including sharing confidential customer information via personal email, in order to maximize profits at customers’ expense;
  • manipulating “the price at which daily benchmark rates were set—both from collusive market activity and improper submissions to benchmark-fixing bodies”; and
  • “misleading customers by hiding markups on executed trades, including by using secretive hand signals when customers were on the phone; or by deliberately ‘underfilling’ a customer trades, in order to keep part of a profitable trade for the Bank’s own book.”

In addition to the $350 million monetary penalty, the Bank must, within 90 days of the consent order, submit written plans to (i) improve senior management’s oversight of the Bank’s compliance with New York laws and regulations governing its foreign exchange trading business; (iii) enhance internal controls and compliance to adhere to state and federal laws and regulations; and (iii) improve its compliance risk management and internal audit programs. Additionally, the Bank terminated certain employees involved in the misconduct and has agreed it will not—directly or indirectly—re-hire these individuals in the future. As part of this process, the Bank conducted an “employee accountability review” and disciplined other employees “for misconduct or supervisory failures.”