NAB and CBA fined for FX fiddles
Front running by staff on client foreign exchange dealings has bought NAB and CommBank to more grief. Each will pay a "fine" of A$2.5 million, labelled a "community benefit payment". Financial literacy programs will benefit, with the fines deemed donations and maybe fit to appear in each bank's social responsibility report.AISC yesterday spelled out accepted enforceable undertakings accepted from both National Australia Bank Limited and Commonwealth Bank in relation to their wholesale spot foreign exchange businesses.ASIC said it held concerns that between 1 January 2008 and 30 June 2013, both banks "failed to ensure that their systems and controls were adequate to address risks relating to instances of inappropriate conduct identified by ASIC."The specifics spelled out by ASIC point to a culture of personal interests displacing ethical conduct by key parties. Managers and systems from both banks were implicated by ASIC in its findings.ASIC said "on a number of occasions, NAB employees disclosed specific confidential details of pending client orders to external market participants, including identification of the client through the use of code names," a claim also made by ASIC of CBA.Then, "on several occasions, a NAB employee on an offshore spot FX desk, acting together with an employee of another Australian bank, shared confidential information and entered offers into the trading platform without any apparent legitimate commercial reason for placing the offers."Similarly, "on two occasions, CBA employees on an offshore spot FX desk acquired proprietary positions in a currency after coming into possession of knowledge of large CBA fix orders in that currency."ASIC said it was concerned NAB "did not ensure that its systems, controls and supervision were adequate to prevent, detect and respond to such conduct, which had the potential to undermine confidence in the proper functioning of the market."On CBA, ASIC said it was concerned the bank "did not ensure that its systems, controls and supervision were effective in relation to such conduct by its employees. Such conduct had the potential to undermine confidence in the proper functioning of the market."Under the EU, NAB will develop a program of changes to its existing systems, controls, monitoring and supervision of employees within its foreign exchange business to prevent and detect dodgy conduct (that final term is our one).For three years NAB will provide ASIC with an annual attestation from its senior executives that the systems and controls in its spot FX business are appropriate and adequate to effectively prevent, detect and respond to specified conduct. The program will be subject to annual internal reviews and assessment by the independent consultant for a period of three years, ASIC said.CBA, ASIC said, "will develop a program of changes to its existing systems, controls, monitoring and supervision relating to the management of fix orders, management of stop loss orders, and external communications containing specific confidential."The program will incorporate changes already made by CBA as part of an existing review of its Global FX business.The same three year terms apply to CBA as to NAB for this FX mischief.