News that French prosecutors have begun a criminal Libor inquiry begs the question about progress on the UK criminal inquiry announced in July 2012 by the SFO.
Much has been made of the flurry of financial settlements that banks have made with US prosecutors e.g. Barclays’ fine of £290 million and it is rumoured that RBS could face a fine of up to £300 million. It appears that Barclays may have received a discounted penalty because they were the first to come forward, and that there are other banks lining up negotiations with prosecutors both sides of the Atlantic.
So far it looks lucrative for prosecutors, but this approach flies in the face of public opinion. A recent YouGov survey in early October concluded that 90% of respondents believe that bankers found guilty of market abuse should be sent to prison. These results echo the views of Martin Wheatley of the FSA, who has been quoted as saying that anyone who deliberately manipulates markets for their own profit could face up to seven years imprisonment and/or a £multimillion fine.
The simple truth is that these allegations will be impossible to successfully prosecute to the criminal standard of proof.
The roles of the Treasury and the BOE remain unclear in the Libor scandal; were the banks doing as they were told to do?
It is unlikely that any meaningful evidence will be found against those in senior positions at the banks, because of management structure and lines of communication.
The prosecutors may find some damming emails implicating traders, who are very much at the bottom of the pile, but prosecuting them alone will not resolve this situation fairly or reflect what the prosecutors and general public feel has occurred.
In September last year, the Treasury and the FSA had asked the then Director of SFO to begin a full investigation into the Libor scandal. He refused, explaining (correctly) that his budget had been severely reduced as a result of Treasury cuts and because of the current work load at the SFO.
It seems that the SFO have been allowed a sum to fund this inquiry but, let’s be honest, a quick cursory analysis of current criminal statutes and common law offences leads to the conclusion that it will be well-nigh impossible to successfully prosecute these offences. There could be nothing more devastating for the SFO to begin another high profile prosecution only for it to fall at the first hurdle.
