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Scant effort to conceal FX misconduct

29 May 2017 3:35PM
An ASIC report drawing together its work into drivers of misconduct observed during its investigation into the wholesale spot foreign exchange market makes disconcerting reading."We observed very few instances in which the misconduct we identified had been detected or escalated within the institution," ASIC said."And there was generally little attempt by individuals involved to conceal their misconduct. "This indicates to us that the individual either believed that the conduct was acceptable (for example, because it was common practice), or they did not consider that engaging in such conduct carried any significant negative consequences."The spot FX market has been the focus of regulatory scrutiny globally in recent years, including by ASIC, which sanctioned a fifth bank (Macquarie) earlier this month.Regulatory action against banks for misconduct and control failings in their spot FX businesses has been taken by a number of international regulators (including the UK Financial Conduct Authority, the US Commodity Futures Trading Commission, the US Department of Justice and the Swiss Financial Market Supervisory Authority), ASIC said."Since 2014, we have undertaken investigations into the conduct of certain Australian financial institutions in the spot FX market, both within Australia and overseas, between 1 January 2008 and 30 June 2013. "In the course of our investigations, we examined large amounts of material, including trading data, phone recordings, emails and chat messages, as well as policies and training and performance documents. "We conducted voluntary interviews and compulsory examinations of numerous individuals, including spot FX traders, spot FX salespersons, and individuals with a supervisory role, up to senior management level, in Australia and overseas."As a result of its investigations, ASIC "accepted five enforceable undertakings as part of which the institutions acknowledged our concerns in relation to failures to ensure that their systems and controls were adequate to address specified risks, and undertook to develop and implement changes to their spot FX businesses which will be assessed by independent experts appointed by ASIC."

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