The Competition Commission has hailed the R42m settlement it reached with UK-based Standard Chartered Bank (StanChart) on Wednesday as vindicating its case against 28 local and international banks for allegedly rigging the rand foreign exchange market more than a decade ago.
The settlement came as the Competition Appeal Court continued to hear argument from the banks that the commission had shown little or no evidence that they were all part of a “single overarching conspiracy” to manipulate the rand between 2007 and 2013.
The commission, which embarked on the case eight years ago, has charged that traders working for local and international banks in the New York market colluded to fix rand/dollar rates in online chatrooms and on trading platforms.
The banks have hit back and are now appealing against the Competition Tribunal’s attempt to go ahead with hearings on the case, despite the shortcomings of the commission’s case.
But on Wednesday, Standard Chartered admitted liability and agreed to pay a R42m penalty and to co-operate with the commission and provide evidence to assist with the prosecution of the other 27 banks.
This was the UK-based bank’s third attempt at a settlement, after the commission rejected earlier offers of R18m in 2019 and R24m in 2020.
Competition commission cartel division manager Makgale Mohlala said the amount finally settled on did not exceed the turnover of Standard Chartered’s Johannesburg branch in the year to end-December 2019.
The commission reached a R70m agreement with Citibank in 2017, not long after the case was referred to the tribunal.
Three other banks have since applied for leniency, which allows them immunity from prosecution as long as they hand over any evidence they have.
“At least we have five of the 28 that are on our side,” Mohlala told the tribunal on Wednesday. “The settlement reduces the number of responsible banks being prosecuted.
“Most importantly, it gives an indication that what the Competition Commission is saying is indeed what happened.” The commission has alleged that the “single overarching conspiracy” affected the value of the rand and ultimately SA consumers and businesses.
But Robert Wilson, appearing for Standard Chartered, said the bank’s share of the rand forex trading market at the time was only 0.4%.
The commission’s original case relied heavily on investigations by the US justice department, which in 2015 fined six banks a total of $6bn for collusion in global foreign exchange trading and brought criminal charges against individual traders at banks such as Barclays and JPMorgan. Four New York-based traders, who at the time worked for Standard Chartered, entered into plea bargains with the department in relation to forex trading, including in the rand.
The UK authorities declined to prosecute the banks, saying the evidence was insufficient.
In contrast to the Citibank settlement, Standard Chartered’s settlement does not commit the bank to testify in the cartel case. Asked by tribunal member Prof Imraan Valodia on Wednesday why this was the case, Wilson said that the last of the implicated traders had left the employ of Standard Chartered in 2015.
The bank therefore had no means to compel them to testify. It would, however, provide the commission with documentary evidence, including transcripts of the online chats.
The bank admitted to engaging in forex market practices that amounted to price-fixing and market allocation, in contravention of the Competition Act.
The act makes this kind of cartel conduct a criminal offence.
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