Professional & Financial Lines (August 2012)

LIBOR Manipulation Coverage

Criminal Investigations

The Wall Street Journal has reported that U.S Prosecutors have offered several former junior UBS AG employees protection from criminal charges in exchange for their cooperation with the expanding probe into alleged interest-rate manipulation. The paper said that a few UBS employees under investigation still work at the Swiss bank, which fired or suspended about 20 managers and traders during the four-year investigation. U.S antitrust officials have been investigating alleged interest rate manipulation by at least 16 banks, including Libor, and UBS is said to be one of the main targets of the regulators. UBS has disclosed that it has received leniency deals from antitrust regulators in the U.S, Switzerland and Canada, but still faces potential enforcement action from the U.S Justice Department's fraud section, the U.S Commodity Futures Trading Commission and the U.K's FSA.

The Serious Fraud Office ("SFO") has begun a criminal investigation into the Libor scandal, but the Treasury has not given it a fixed budget and will make money available to the SFO in instalments based upon how the investigation is progressing. This comes after Sir John Thomas, president of the Queen's Bench Division, said that the SFO lacked the resources to do its job effectively. The SFO agreed to take on the Libor case last month, in the wake of disclosures that the rate at which banks lend to each other had been manipulated. Danny Alexander, Chief Secretary to the Treasury, has said "I want the SFO to follow the evidence wherever it goes to bring prosecutions if it possibly can".

Regulatory Investigations

Mitsubishi UFL Financial Group has said its banking unit suspended a London-based employee, the third worker in a month, as UK authorities investigate suspected manipulation of Libor rates. Hironori Imafuku said that the worker had been asked to stay at home, without naming the employee or giving further details. A source commented that the employee was being questioned by the FSA after allegedly being contacted by others to participate in the rate manipulation after 2008. This comes after the Bank of Tokyo-Mitsubishi ("BTMU") said on 10 July that it had suspended two traders in London in relation to the Libor investigation. At that time, the bank said their suspension was not connected with their conduct at the Japanese bank. According to the FSA register, the traders worked together at the Dutch bank Rabobank...