Rand manipulation: As banks want SA case 'euthanised' some face fines in Europe and the US

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The Competition Commission says no one is prosecuting the manipulation of the Rand while some of these banks it is suing are getting fined left and right elsewhere.
The Competition Commission says no one is prosecuting the manipulation of the Rand while some of these banks it is suing are getting fined left and right elsewhere.
  • The Competition Commission's rand manipulation case has been going on since April 2015.
  • As it returned to the Commission Tribunal with new charge sheets this week, banks' lawyers said it's about time its case gets "euthanised". 
  • But the commission says no one is prosecuting the manipulation of the rand, while some of these banks are getting fined elsewhere.

The Competition Commission came back with vigour to try and nail the 28 banks it accused of manipulating the rand this week. 

It had to sharpen its arguments this time around, given that it had already been sent to the drawing board before when the Competition Appeal Court ordered it to provide new charge sheets with further clarification.

But after the commission presented its case on the first day of the Competition Tribunal hearing, banks' lawyers were sure that they'd win this round again. They all agreed that the commission has failed to put together a triable case, with many saying that it has not built any case against their individual clients.

The lawyer for HSBC entities Alfred Cockrell went as far as asking the tribunal to finally "euthanise" the commission's case because years of back and forth have proven that there was nothing there.

Since some of the alleged conspirators were cited on one or two chats, banks believe there is no way the commission would successfully convince any court that there was a single overarching conspiracy by all 28 banks to manipulate the rand, unless it brought that case because it believed the tribunal would let it get away with it.

However, these lawyers fail to recognise that the chats referenced in the commission's documents only show one piece of the puzzle, said the Commission's lawyers on Friday.

Advocate Tembeka Ngcukaitobi pointed out that the implicated traders also used telephones and talked about instant messages they were sending to each other outside of the chatrooms where the commission picked up the alleged collusive behaviour. These instant messaging platforms were used to communicate to other traders that didn't have access to the chatrooms. 

He also pointed to specific dates whereby the traders agreed to meet for drinks to discuss their spreads on the rand's spot price. 

Although most of the foreign banks say their traders didn't speak to any representatives of the South African banks, Ngcukaitobi painted a spiderweb of chats and that he said ultimately showed how everyone was connected.

For instance, the trader Jason Katz who was allegedly employed by Standard Americas and whom the commission said was the central figure in the conspiracy, spoke to Absa. The Absa trader was talking to the Nomura trader. The Nomura trader was talking to someone else, and the alleged chain of information went on even though they weren't all directly speaking to each other, said Ngcukaitobi.

"Ask yourself, what picture do I draw from this. Look at where the communication is going from other banks," said Ngcukaitobi.

Frances Hobden said the commission's legal team was even surprised that Katz had time for anything other than relaying the chats because he was "everywhere".

"Any information that was shared with Katz, you can bet a million-dollar that Katz was sharing it with everyone else," she said.

Ngcukaitobi said the banks, therefore, cannot argue that just because they only appear once or twice in the commission's documents, they have nothing to answer to. Hobden said banks were picking and choosing what facts they wanted to respond to, selecting those they felt they could defend.

But the Commission is likely to come back with more punches should the matter go to trial. It said it is not required to provide the full evidence at its disposal at this stage.

Many of the banks have been fined in Europe and US

Some of the banks that the commission is suing have been prosecuted for foreign exchange cartels in Europe and the US. These include Barclays, HSBC, Credit Suisse, JP Morgan and Bank of America. The latest punishment came from the European Union antitrust regulators on Thursday.

But they argued that since they've already faced the US and European authorities, SA has no jurisdiction to make them answer for the second time. 

The tribunal has already ruled that it has jurisdiction over foreign banks that have offices in SA. Ngcukaitobi argued that even those who don't can't escape its wrath should it find that they were involved in the conspiracy.

He said because they had an inter-relationship with local banks and other foreign banks that have offices in SA, they discussed the rand/dollar exchange quotes they were giving to SA companies, and they should be held accountable in SA too.

Ngcukaitobi pointed out that the American authorities were interested in protecting the manipulation of the US Dollar. The European judgments have also been about the Euro. 

"There is no one that has prosecuted the anticompetitive conduct that comprises the manipulation of the South African rand. It has not been prosecuted by anyone," he said.

Ngcukaitobi said if SA authorities cannot prosecute these foreign banks because of jurisdiction matters, that would leave the door wide open for powerful private firms to exploit a country because of territorial divisions.

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