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From Antitrust Law Daily, January 7, 2014

RBS Securities Japan sentenced in U.S. LIBOR probe

By Jeffrey May, J.D.

The Department of Justice has announced that Royal Bank of Scotland’s Japanese subsidiary, RBS Securities Japan Limited, was sentenced yesterday in the federal district court in Hartford, Connecticut to pay a $50 million fine for its role in a rate rigging scheme involving the Japanese Yen London Interbank Offered Rate (LIBOR) (U.S. v. RBS Securities Japan Ltd., Criminal No. 3:13-cr-00073 MPS).

RBS Securities Japan Limited was charged on April 12, 2013, with felony wire fraud (18 U.S.C. Sec. 1343), related to the manipulation of the Japanese Yen LIBOR. LIBOR serves as the primary benchmark for short-term interest rates globally and is used as a reference rate for many interest rate contracts, mortgages, credit cards, student loans, and other consumer lending products, according to the Department of Justice.

RBS Securities Japan entered into a plea agreement to resolve the wire fraud charge. The court has now accepted the recommended $50 million fine.

According to the plea agreement, between 2006 and 2010, certain RBS Securities Japan Yen derivatives traders engaged in efforts to move LIBOR in a direction favorable to their trading positions. The scheme included efforts to manipulate more than one hundred Yen LIBOR submissions in a manner favorable to RBS Securities Japan’s trading positions. Certain RBS Securities Japan Yen derivatives traders, including a manager, engaged in this conduct in order to benefit their trading positions and thereby increase their profits and decrease their losses, the Justice Department alleged.

In February 2013, parent company Royal Bank of Scotland (RBS) announced that it had agreed to pay approximately $612 million in penalties under settlements with the United Kingdom Financial Services Authority (FSA), the U.S. Commodity Futures Trading Commission (CFTC), and the U.S. Department of Justice. The settlements resolved allegations that the financial institution manipulated the Yen and Swiss Franc LIBOR between 2006 and 2010. RBS entered into a deferred prosecution agreement (DPA). Under the DPA, RBS admitted that it had engaged in wire fraud with respect to the manipulation of LIBOR benchmark interest rates, and that it had conspired to rig the Yen LIBOR benchmark interest rate with other banks and to pay a $100 million penalty.

RBS was the third financial institution to settle with regulators over the alleged rate setting. The settlements announced by RBS followed a similar deal reached by Swiss banking group UBS AG with U.S., U.K., and Swiss regulators in December 2012 and Barclays plc’s agreement to pay the CFTC $200 million in July 2012. UBS and Barclays had entered into non-prosecution agreements (NPAs) with the Justice Department. Since the charges were filed against RBS, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) has entered into a DPA with the Department of Justice and has agreed to pay a $325 million penalty for its role in the LIBOR and Euro Interbank Offered Rate (Euribor) schemes.

Attorneys: David Raskin (Clifford Chance US LLP) for RBS Securities Japan Ltd.

Companies: Royal Bank of Scotland plc; RBS Securities Japan Ltd.; Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A.; UBS AG; Barclays plc

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