Barclays 2015 Annual Report Download - page 310

308 I Barclays PLC Annual Report 2015 home.barclays/annualreport
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
29 Legal, competition and regulatory matters continued
Foreign Exchange Investigations
Various regulatory and enforcement authorities have been investigating a range of issues associated with Foreign Exchange sales and trading,
including electronic trading. Certain of these investigations involve multiple market participants in various countries. The Group has reached
settlements with the CFTC, the DOJ, the New York State Department of Financial Services (NYDFS), the Board of Governors of the Federal Reserve
System (Federal Reserve) and the FCA (together, the Resolving Authorities) with respect to certain of these investigations as further described below.
Investigations by the European Commission (Commission), the Administrative Council for Economic Defence in Brazil and the South African
Competition Commission, amongst others, remain pending.
Background Information
In May 2015, the Group announced that it had reached settlements with the Resolving Authorities in relation to investigations into certain sales and
trading practices in the Foreign Exchange market, that it had agreed to pay total penalties of approximately $2.38bn, including a $60m penalty
imposed by the DOJ as a consequence of certain practices continuing after entry into the LIBOR NPA, and that BPLC had agreed to plead guilty to a
violation of US anti-trust law.
Under the plea agreement with the DOJ, BPLC agreed to pay a criminal fine of $650m and a term of probation of three years from the date of the
final judgment in respect of the plea agreement during which BPLC must, amongst other things, (i) commit no crime whatsoever in violation of the
federal laws of the United States, (ii) implement and continue to implement a compliance program designed to prevent and detect the conduct that
gave rise to the plea agreement and (iii) strengthen its compliance and internal controls as required by relevant regulatory or enforcement agencies.
Pursuant to the settlement with the CFTC, BBPLC consented to, among other things, pay a civil monetary penalty of $400m.
Pursuant to its settlement with the Federal Reserve, BBPLC and BBPLC’s New York branch consented to an order imposing a civil monetary penalty of
$342m and ordering BBPLC and BBPLC’s New York branch to submit in writing to the Federal Reserve Bank of New York for its approval certain
programs to enhance internal controls and compliance. Under the Federal Reserve order, BBPLC and its institution-affiliated parties must not in the
future directly or indirectly retain certain individuals who participated in the misconduct underlying the order.
Pursuant to the settlement with the NYDFS, BBPLC and BBPLC’s New York branch consented to an order imposing a civil monetary penalty of $485m
and requiring BBPLC and BBPLC’s New York branch to take all steps necessary to terminate four identified employees. BBPLC and BBPLC’s New York
branch must also continue to engage the independent monitor previously selected by the NYDFS to conduct a comprehensive review of certain
compliance programs, policies, and procedures.
The FCA issued a Final Notice and imposed a financial penalty of £284m on BBPLC.
The full text of the DOJ plea agreement, the CFTC, NYDFS and Federal Reserve orders, and the FCA Final Notice referred to above are publicly
available on the Resolving Authorities’ respective websites.
The settlements reached in May 2015 did not encompass ongoing investigations of electronic trading in the Foreign Exchange market. The Group is
cooperating with certain authorities which continue to investigate sales and trading practices of various sales and trading personnel, including
Foreign Exchange personnel, among multiple market participants, including BBPLC, in various countries.
The FCA is also investigating historic pricing practices by BBPLC associated with certain Foreign Exchange transactions for certain customers
between 2005 and 2012. BBPLC is cooperating with the FCA regarding the proposed terms and timing for appropriate customer redress.
For a discussion of civil litigation arising in connection with these investigations see ‘Civil Actions in Respect of Foreign Exchange Trading’ below.
Recent Developments
In November 2015, BBPLC announced that it had reached a settlement with the NYDFS in respect of its investigation into BBPLC and BBPLC’s New
York branch electronic trading of Foreign Exchange and Foreign Exchange trading systems in the period between 2009 to 2014. Pursuant to the
settlement the NYDFS imposed a civil monetary penalty of $150m, primarily for certain internal systems and controls failures. The Group continues
to cooperate with other ongoing investigations.
Claimed Amounts/Financial Impact
The fines in connection with the May 2015 settlements with the Resolving Authorities were covered by the Group’s provisions of £2.05bn.
A provision of £290m in redress costs for certain customers was recognised in Q3 2015 in relation to the FCA investigation into historic pricing
practices by BBPLC associated with certain Foreign Exchange transactions referred to above. It is not currently practicable to provide an estimate of
any further financial impact of the actions described on the Group or what effect they might have on the Group’s operating results, cash flows or
financial position in any particular period.