Criminal penalty not on table in forex case
The banks and individual traders identified in the Competition Commission’s referral to the Competition Tribunal do not face the prospect of criminal sanction by the competition authorities even if found guilty of price-fixing and market manipulation in the foreign exchange market.
The Competition Act was amended with effect from May 2016 to provide for criminal sanctions to be imposed on individuals for certain competition law contraventions such as those identified in the commission’s referral. However, the contraventions identified by the commission took place between 2007 and 2013, predating the introduction of criminal sanction. Because it cannot pursue criminal sanction, the commission is expected to push hard for the maximum possible fine.
One competition lawyer said it was not surprising that Absa and Barclays (as well as Citigroup) had struck a deal with the commission. In May 2015 Barclays was one of the banks that settled with the US department of justice in a related case.
“At the time Anthony Jenkins was CEO of Barclays, he was keen to clean up all the scandals that had sprung up in the wake of the departure of swashbuckling Bob Diamond. Jenkins made sure all Barclays’ subsidiaries across the globe co-operated with regulators,” said the lawyer.
Jenkins was fired months after settling with the justice department as his board became increasingly frustrated by his determination to clean up the bank’s image at almost any conceivable cost.
The 18 banks that have been charged by the commission have 20 days from the date of referral to respond to the charges. Given the complexity of the matter it is likely that all the banks will request an extension. “Some of the banks will settle and reach a consent agreement with the commission, rather like the construction companies did,” said the lawyer.
Such an agreement has to be condoned by the Competition Tribunal and can be challenged by any party able to establish an interest in the matter. This introduces a level of uncertainty that might discourage banks from pursuing this option.
A second option is for the banks to challenge every aspect of the commission’s charges and demand the supporting documents in the hope of minimising the potential fine. The disadvantage of fighting a long battle is the bad publicity that would accompany it. This would be less of a disincentive for the large international banks that have limited exposure to the South African public.
A third option is for Economic Development Minister Ebrahim Patel to intrude himself into the matter — as he did with cases involving the construction and bread cartels. Patel emerged as a deal maker in setting the terms of approval for the takeover of SABMiller by Anheuser-Busch InBev. He could use the opportunity provided by this highly politicised forex case to craft the terms of a wideranging settlement.
THE 18 BANKS THAT HAVE BEEN CHARGED BY THE COMMISSION HAVE 20 DAYS FROM THE DATE OF REFERRAL TO RESPOND