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INTERVIEW-British fraud prosecutor signals possible forex charges next year

by Reuters
Wednesday, 23 July 2014 16:21 GMT

In this 2012 file photo, David Green, director of the Serious Fraud Office (SFO), gestures during an interview with Reuters in London November REUTERS/Stefan Wermuth

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Having launched exhaustive internal investigations, banks have fired, suspended or placed on leave around 40 foreign exchange traders globally

* FX inquiry focused on limited number of individuals, firms

* To file criminal changes against Alstom imminently

By Kirstin Ridley

LONDON, July 23 (Reuters) - British prosecutors could charge the first individuals in connection with a global investigation into alleged manipulation of currency markets as soon as next year, the head of the country's Serious Fraud Office (SFO) said on Wednesday.

David Green, who announced on Monday that the SFO would join U.S. prosecutors and regulators worldwide in investigating allegations of misconduct in the $5.3 trillion-per-day foreign exchange market, said he had "reasonable grounds" to suspect that an offence of serious or complex fraud was involved.

"I think it would be ambitious to expect charges this year but ... I wouldn't discount that possibility (next year) at all," he said.

"We're (currently) having a fairly focused inquiry into a limited number of individuals and a limited number of financial institutions, including banks, and we'll take that as the first phase and see where we go from there."

Having launched exhaustive internal investigations, banks including Deutsche Bank, Barclays, Citigroup , UBS and HSBC have fired, suspended or placed on leave around 40 foreign exchange traders globally.

Green, who took over as SFO director in April 2012 vowing to focus on top-tier economic crime, has been tasked with restoring confidence in the agency after his predecessor was accused by lawmakers of running a "sloppy and slovenly" operation.

The SFO, which operates on a tight budget of around 33 million pounds ($56 million), can request extra "blockbuster" funding from its government paymasters for exceptionally costly cases. It has yet to request such additional funds for its fledgling foreign exchange (forex) probe.

"I don't yet know if I'll need it," Green said. But he added: "My guess would be that we will."

He declined to be drawn on whether the evidence seen so far indicated that allegations of wrongdoing in forex markets eclipsed those that shredded faith in interest rate benchmarks such as Libor (London interbank offered rate), against which around $450 trillion of financial contracts are priced globally.

Ten banks and brokerages have been fined around $6.0 billion to date to settle regulatory allegations of benchmark interest rate manipulation and 17 men have been criminally charged - 12 by the SFO. More charges and fines are expected.

At the centre of the forex investigations is activity around the 4 p.m. currency fix in London, a 60-second window where key exchange rates are set. These prices are used as reference rates for trillions of dollars of investment and trade globally.

ALSTOM CHARGES IMMINENT

The SFO's five-year investigation into alleged corruption at Alstom is also nearing criminal charges just weeks after the French engineering group agreed a 12.4 billion euro ($16.7 billion) sale of most of its power business to U.S. conglomerate General Electric.

"Significant developments are imminent - charges are imminent," Green said, adding that it was logical in such a case to charge the company before focusing on individuals.

But he added: "A number of individuals are of acute interest in the investigation."

The move comes four years after the SFO arrested three members of Alstom's board in the UK over allegations of bribery, money laundering and false accounting. Three years ago, two of them - Robert Purcell and Stephen Burgin - unsuccessfully challenged the legitimacy of SFO searches.

Authorities in countries such as the United States and Brazil have also been investigating whether Alstom staff bribed officials to win lucrative contracts in countries such as Indonesia, India and China.

Three executives of Alstom's U.S. subsidiary in Connecticut have pleaded guilty and admitted to paying bribes on behalf of the company in connection with a project on the Indonesian island of Sumatra.

Green declined to comment on whether the SFO had had direct contact with General Electric (GE).

The GE deal, which sparked a two-month tug-of-war with the French government, is expected to be submitted to shareholder approval by the end of this year and to close by mid-2015.

Green, who joined a demoralised and underfunded SFO two years ago amid high hopes that he could secure its independent future, said the agency now had the focus, resilience and determination it needed to counter well-heeled white collar criminals, the companies they worked for - and their lawyers.

"Some companies think we might just get fed up and walk away," he said. "But we won't."

Its case load, that includes an inquiry into commercial practices at pharmaceuticals group GSK, a probe into Barclays' fundraising from Qatar and an investigation into allegations of bribery and corruption at Rolls Royce , is now of the right calibre, Green said.

"We now have all the blocks in place for success. We've got the right case load, resources and the right people. We do a really tough job but I think we have made significant progress and there will be really significant progress in future."

($1 = 0.5871 British Pounds)

($1 = 0.7426 Euros) (Editing by Mark Potter)

Our Standards: The Thomson Reuters Trust Principles.

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