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From Securities Regulation Daily, May 25, 2017

New York fines BNP Paribas $350M for foreign exchange trading misconduct

By Charles A. Menke, J.D.

BNP Paribas S.A. and its New York branch have agreed to pay a $350 million fine to settle charges brought by the New York State Department of Financial Services (DFS) that the bank engaged in significant, long-term violations of New York banking law arising out of its global foreign-exchange business. According to the DFS, the violations included major deficiencies in oversight that allowed numerous traders and salespeople to engage in unrestricted misconduct. Under a consent order entered into with the DFS, BNP Paribas took disciplinary action against several employees, and also agreed to take a number of remedial actions to improve future oversight and compliance.

"[T]he Bank paid little or no attention to the supervision of its foreign exchange trading business, allowing [BNP Paribas] traders and others to violate New York State law over the course of many years and repeatedly abused the trust of their customers," DFS Superintendent Maria T. Vullo said. "DFS appreciates the Bank’s cooperation in resolving this matter and for the remedial measures taken to address some of the misconduct arising within the Bank’s FX Trading Business in connection with our investigation."

DFS investigation. A DFS investigation found that numerous foreign exchange traders had engaged in various acts of misconduct from 2007 to 2013, including:

  • collusion through on-line chat rooms that involved fake trades designed to manipulate prices;
  • collusion in setting spreads for customers trading in certain currencies, in order to widen the spreads and artificially increase profits;
  • improperly exchanging information about past and impending customer trades in order to maximize profits at customers’ expense that involved, among other things, the sharing of confidential customer information via personal e-mail and through the use of a sophisticated codebook that helped identify dozens of clients, central banks or important market participants and specified trading volumes;
  • manipulating the price at which daily benchmark rates were set; and
  • misleading customers by hiding markups on executed trades by, among other methods, using secretive hand signals when customers were on the phone; or by deliberately "underfilling" customer trades, in order to keep part of a profitable trade for the bank’s own book.

Terms of consent order. In addition to the fine, BNP Paribas agreed to submit plans to improve senior management oversight of the company’s compliance with New York laws and regulations governing the bank’s foreign exchange trading business. In addition, BNP Paribas will enhance internal controls and risk management, and improve its compliance risk management program. The bank also took disciplinary action against a number of employees involved in the misconduct, including firing several employees, and agreed not to re-employ these employees in the future.

Companies: BNP Paribas SA

MainStory: TopStory CommodityFutures Derivatives Enforcement FinancialIntermediaries FraudManipulation Swaps NewYorkNews

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