United Kingdom prosecutors are poised to arrest former traders and rate setters at UBS AG, Royal Bank of Scotland Group Plc and Barclays within a month for questioning over their role in the Libor scandal, a person with knowledge of the probe said.
Police, directed by Serious Fraud Office prosecutors, will act in the next month, said the person, who declined to be identified because the matter isn’t public.
Arrests in the United Kingdom are made early in investigations, allowing people, who may not be charged, to be questioned under caution.
The SFO has 40 people working on the probe into manipulation of the London interbank bank offered rate, a benchmark for financial products valued at $360 trillion worldwide, and has involved the City of London Police, said David Green, the agency’s director.
“Significant developments” in the case are coming “in the near future,” Green said yesterday in an interview at his office in London, without giving further details and declining to comment on possible arrests.
The SFO opened the investigation in July at the request of British politicians after Barclays was fined a record £290 million ($462 million) for rate manipulation. Regulators across the globe are investigating claims banks altered submissions used to set Libor in an effort to benefit traders, or so the lenders would appear financially healthier.
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The arrests could be temporarily delayed because of disruptions to the SFO’s schedule caused by a move in offices.
Green said the agency is focusing on the most egregious attempts to manipulate Libor and other related benchmarks. Investigations into firms, managers, traders and rate setters at lesser offenders will come later.
Regulators in the US and UK are looking into how derivatives traders and bankers who submitted interest-rate data colluded to rig benchmarks to benefit their own trades, and whether lenders low-balled submissions in 2008 to hide their true cost of borrowing. Criminal probes by the SFO and US Department of Justice are running in parallel with civil investigations being conducted by the DOJ’s fraud division, the US Commodity Futures Trading Commission and the UK Financial Services Authority.
Barclays spokesman John McGuinness, UBS spokesman Richard Morton and RBS spokesman Michael Strachan all declined to comment.
UBS and RBS are next in line to settle with the regulators, people familiar with the case have said. Edinburgh-based RBS fired four traders following an internal probe.
More than 25 people have left UBS after an internal review of interest-rate manipulation, a person familiar with the matter said. Robert Diamond, who stepped down as Barclays chief executive officer after the fine, said 14 traders were involved in wrongdoing at the bank.
The SFO has “hoovered up all the stuff from the FSA and loaded it onto our computers,” Green said. It has also received evidence from the US Federal Bureau of Investigation and some of the banks.
The SFO is cooperating with the DOJ on a request for access to information from the UK, Green said. That could include US investigators sitting in on SFO interviews with suspects, or having access to evidence the agency has gathered.
The request, which came under a mutual legal assistance treaty, or MLAT, was initially stalled while the SFO sought to get up to speed on the case. The DOJ submitted an amended request in recent months with “very substantial” information sought, Green said.
“Obviously when we first received it there was anxiety that execution of the request could mop up SFO resources,” he said. “We are anxious to execute it” and will “certainly” assist, he said.
Green said the agency, while working closely with the DOJ, is also competing to bring charges first in order to handle the prosecution of any British citizens in the UK, reducing the chance of extradition.
The SFO’s previous director, Richard Alderman, declined to get involved in the case. Green took over as director in April.
The agency, which is considering bringing charges of conspiracy to defraud, is unlikely to conduct raids on banks in the case, Green said. It’s mostly targeting individuals and are also considering whether they can bring charges against firms. In order to do so, the SFO would have to prove that a “controlling mind” at a bank knew of the behavior, Green said.
The agency doesn’t have any cooperating witnesses yet in the case, but that’s a possibility, he said. The DOJ is working with several and is basing part of their case on the evidence gained from them, a person familiar has said previously.
Jane de Lozey and Matthew Wagstaff are overseeing the Libor investigation, with staff from external consultancy, accounting and law firms, and with two people from the Crown Prosecution Service, Green said. The Treasury has earmarked £3.5 million for the SFO’s Libor investigation.