Barclays Fined $44 Million For Manipulating London Gold Fix

gold-piggy-bank-brokenBritain’s Financial Conduct Authority (FCA) announced a $44 million settlement with Barclays Bank over a 2012 case of gold manipulation to the detriment of a Barclays client. The charge by the FCA was for lax oversight and breaches of rules over the gold fixing process.

While the fine is exceedingly small compared to Barclays’ annual income, it further stains the reputation of the bank, which is attempting to recover from hundreds of millions of dollars in fines stemming from manipulation of LIBOR interest rates and money laundering. Barclays CEO Antony Jenkins, who replaced Jamie Diamond after the LIBOR scandal, told reporters

“We very much regret the situation that led to this settlement. Barclays has undertaken a significant amount of work to enhance our systems and controls and is committed to the highest standards across all of our operations.

While there is much more to do to achieve the deep-rooted cultural change we embarked upon at the start of 2013, Barclays today has significantly changed for the better. We are committed to remain focused on delivering on this agenda, underpinned by our Purpose and Values. These situations strengthen our resolve to improve.”

Jenkins has struggled to turn the troubled bank around since becoming CEO in August 2012.

The FCA reports that this particular incident happened on June 28, 29012, only one day after the bank was fined £290 million ($488.4 million) for its role in manipulating the LIBOR rate.

marionette-03Daniel James Plunkett, a director of Barclays’ precious metals desk, filed multiple fake sell orders during the afternoon London Gold Fix, in order to avoid paying a client on his gold derivatives contract. Had the afternoon fix come in at or above $1,558.96, Barclays would have had to pay a client $3.9 million. Since Plunkett manipulated the price below that level, the bank did not have to pay the money, and Plunkett’s trading book made a $1.75 million gain.

The previous evening, Plunkett sent an email to various other gold traders, stating that he was “hoping for a mini puke” on the afternoon fix the next day. This raises the question of whether such requests for assistance in manipulating the gold fix were common among the top traders of market-making entities, a subject that the FCA did not address in today’s announcement.

The client in question became suspicious, and complained to Barclays. The bank promptly compensated the bilked client fully, and reported the violation to regulators. When confronted, Plunkett denied any wrongdoing, and lied to Barclays and regulators about his actions. He left Barclays later that year. The FCA has fined Plunkett £95,600 ($161,000) and banned him from the financial services industry. Barclays has fully cooperated with the FCA throughout the investigation, which earned it a 30% discount on its fine.

This explosive news comes just three days after Marc Booker, Barclay’s head of gold spot trading and one of only two employees certified as London gold fix representatives, left the bank.

One section of the market will be quite happy at today’s news — the people who have filed class-action lawsuits against Barclays and the other four London gold fix banks, accusing them of manipulating gold prices.

moneymanAs reported before, German banking giant Deutsche Bank abruptly announced its resignation from the London gold fix board after Germany’s top financial regulator, BaFin, requested documents from the bank related to foreign exchange operations, and interviewed several of the staff. The president of BaFin told reporters at the time that the currency manipulation could exceed that of LIBOR, and intimated that the forex investigations could spread to gold.

This week, BaFin announced “concrete evidence” of manipulation of several smaller currencies on the global market (Financial Times).

Deutsche Bank was unable to find a buyer for the formerly prestigious seat on the Gold Fix, and simply abandoned the position on May 13 — a first in the nearly 100 year-old institution.

 

 

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