Mary Monson Solicitors has experience advising people accused in connection with false submissions to regulators and other bodies. Our City of London Office regularly advises workers in the financial services sector, recognising that it is not just the threat of custody, but also the threat of losing one's career, which makes these prosecutions so unpleasant. We have included some basic information about the nature of these investigations below, including the investigative and legal approach usually taken.
Banking Fraud - The Start of the Investigation
The first that an employee may hear of an allegation into rate fixing could be either in the context of an internal review or disciplinary procedure, or an outside investigation by the FSA.
If an internal investigation is being carried out by the employer, where there is any doubt, legal advice should be obtained immediately. It should be born in mind that evidence gathered at any meetings with colleagues and supervisors may well appear later as evidence in a criminal or regulatory investigation, and should therefore be treated with care.
In a banking fraud investigation the banking industry worker may not initially realise that the case has already taken a criminal turn. If the employee at any point hears the words ‘interview under caution' or is reminded of his or her right to representation, then it means that the investigator is making this clear precisely because he or she wishes to preserve the evidence formally. These should be taken as a sign that an investigation which could lead to prosecution is being conducted.
Of course, once an outside agency such as the City of London Police, the FSA etc. becomes involved, a person should be aware that the investigation has become serious. Nothing should be said without access to appropriate legal advice. In the event of arrest, a duty solicitor referred at a police station, while competent in respect of the general crime they are accredited to do, may not be adequately conversant with the terminology and processes related to disclosure of rates and prices of various derivatives etc.
It is important to recognise both the Police and other state investigators as the opposition in this process. Once an investigation into suspected banking fraud is started, the process is not inquisitorial per the European criminal process. It is adversarial, which means that the aim is charge and conviction. Assurances from regulators and police about investigations being for the purposes of ‘information gathering' or ‘to get your side of what happened' should be treated with suspicion, or at least severe caution. As the famous mistranslation goes, ‘Beware of Greeks bearing gifts'.
If evidence is gathered which the Crown thinks is strong enough to charge, then various options exist as to the law under which cases are prosecuted.
By far the easiest option open to a prosecutor in an allegation of rate fixing is Conspiracy to Defraud under common law. In extremely simplified form, the prosecution has to show a plan between two or more people to expose another to loss of an advantage or position or risk thereof.
It has been mooted that in the current Libor cases, the SFO will prosecute the offences under the Fraud Act 2006, which only is applicable for offences committed from January 1st 2007. The maximum sentence under this legislation is ten years imprisonment per offence, and in cases of large significance in the market, such sentences might be expected.
A false representation must be dishonestly made for this offence to be made out, and the intent must be gain for oneself or loss to another. The representation can furthermore be made by entering data into a system, rather than to a person, which of course may be of relevance in rate submission cases
Evidence in Banking Fraud Cases
The evidence in rate fixing cases takes various forms. The obvious method of forensically establishing rate fixing is to assess lending rates (or other rates/prices) actually obtained by traders/institutions and compare them with the actual submission made to the BBA or other organisation. This will probably not, however, make for conclusive proof of guilt to the criminal standard (which is a high one). The prosecution would be expected to adduce evidence of email and recorded telephone conversations between banks to show that the misstatement was part of a dishonest plan, and not simply an error or systems failure.
Dishonesty and Interpretation
The general rules about criminal guilt apply in any case involving the alleged fixing of prices or rates. There must be a motive to distort, and there must be dishonesty for a prosecution to succeed. Submitting data might not be enough if the significance of the data is not fully known.
In the latest Libor cases, it might be expected that the exact motives of those colluding will be placed under the microscope. On certain days where submissions have been made, no data regarding actual trades will have been available. If estimates have to be made against a backdrop of little data, other factors may well be argued as being relevant which cast doubt on whether it was that clear cut that a submission was inaccurate. These grey areas in the interpretation of what was expected may provide an obstacle the prosecution, as with any banking fraud investigation.
The usual rules apply with regard to specialist fraud cases. Specialist banking fraud solicitors and barristers are essential for the defence. There is usually little time to be explaining principles of banking practice to one's legal team. While every industry has its idiosyncrasies, the reality is that a basic knowledge of the workings of the City is a given.