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Britain charges UBS trader over Libor scandal

Britain's Serious Fraud Office on Tuesday said that former UBS trader Tom Hayes had become the first person to be charged in connection with its probe into the Libor rate-rigging scandal that has rocked the banking sector.

Published: 18 June 2013 13:23 CEST
Britain charges UBS trader over Libor scandal
Photo: UBS

"Tom Hayes, a former trader at UBS andCitigroup, has today been charged with offences of conspiracy to defraud in connection with the investigation by the Serious Fraud Office into the manipulation of Libor," it said in a statement, adding that its probe into Libor manipulation would continue. 

The SFO added that Hayes, 33, had been charged by City of London police with eight counts of conspiracy to defraud. 

It was not clear whether the charges related to his time at Swiss bank UBS and/or US rival Citigroup. 

In December, British, Swiss and US regulators fined UBS a total of 1.4 billion francs (1.1 billion euros, $1.5 billion) for having manipulated the Libor Interbank lending rate which determines a vast number of financial and interest rate contracts around the world. 

An SFO spokesman declined to comment on which bank the charges related to, adding only that Hayes would appear before London's Westminster Magistrates' Court on Thursday. 

Hayes, who has worked in London and Tokyo, has already been charged with conspiracy to commit fraud by the US Justice Department last December. 

The latest twist in the scandal comes after the British Bankers' Association last week announced changes to Libor interest-rate transparency in a bid to avoid a repeat of the damaging affair. 

The BBA said that publication of banks' individual submissions of the Libor interbank lending rate would be embargoed for three months in a move aimed at avoiding renewed manipulation of the borrowing cost as occurred in the past. 

It added that the change, which followed recommendations of a review initiated by the British government, would take effect from July 1st. 

The BBA is meanwhile to shortly lose its role of Libor rate-setter in the wake of the rigging crisis. 

Libor is calculated daily, using estimates from banks of their own interbank rates. However, the system has been found to be open to abuse, with some traders lying about borrowing costs to boost trading positions or make their bank seem more secure. 

The Libor scandal erupted last year when Barclays bank was fined £290 million ($470 million, 363 million euros) by British and US regulators for attempted manipulation of Libor and Euribor interbank rates between 2005 and 2009. 

Royal Bank of Scotland has also received heavy fines over alleged rigging of Libor — a flagship instrument used all over the world, affecting what banks, businesses and individuals pay to borrow money. Euribor is the eurozone equivalent. 

The European Union is meanwhile pressing ahead with reforms to tighten up its supervision of banks and key financial market benchmarks, which could include interbank lending rates.

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FRANCE

Switzerland’s UBS faces €3.7-billion fine as crucial court ruling looms

A Paris court will rule Wednesday on whether Swiss banking giant UBS illegally tried to convince French clients to hide billions of euros in Switzerland, charges which prompted prosecutors to seek a record €3.7-billion fine.

Published: 19 February 2019 09:10 CET
Switzerland's UBS faces €3.7-billion fine as crucial court ruling looms
UBS denies charges it helped French clients evade tax and says it will defend itself "vigorously". Photo: AFP

The trial opened last autumn after seven years of investigations, launched when several former employees came forward with claims of unlawful conduct. 

The move came as authorities across Europe cracked down on tax evasion and dubious banking practices in the wake of the global financial crisis which erupted in 2007.

The pressure eventually forced Switzerland to effectively end its tradition of ironclad bank secrecy, by joining more than 90 countries which agreed to automatically share more client account information among each other.

In the UBS case, French authorities determined that more than €10 billion had been kept from the eyes of tax officials between 2004 and 2012.

The National Financial Prosecutor's office urged a €3.7-billion ($4.2 billion) fine, the largest ever sought in France, saying the bank and its directors “were perfectly aware that they were breaking French law” by unlawfully soliciting clients and helping them evade French taxes.

They also sought a €15 million fine for UBS's French subsidiary, and fines of up to €500,000 for six top executives, including Raoul Weil, the former third-in-command at UBS, and Patrick de Fayet, formerly the second-ranking executive for its French operations.

In addition, lawyers for the French state, which is a plaintiff in the case, asked for €1.6 billion in damages.

UBS, which was ordered to post €1.1 billion in bail, has denied the charges and said its operations complied with Swiss law.

It also says that it was “unaware” that some French clients had failed to declare assets in Switzerland, and that prosecutors have not produced any proof, such as client names or account numbers, to back up their fraud claims.

The case is being closely watched by industry executives at a time when Paris and other European capitals are hoping to lure multinational banks from London as Brexit looms.

'Milk tickets'

UBS is accused of organising or inviting prospective clients to prestigious outings such as the French Open or luxury hunting retreats, where UBS's Swiss bankers would meet their “prospects” — something they were not allowed to do under French law.

UBS France directors then used notes called “milk tickets” to keep track of how many “milk cans” – amounts of money – were transferred to Swiss accounts.

They say the system was merely a way to balance out bonuses due to French bankers who were effectively losing a client to their Swiss peers, and the notes were later destroyed.

But investigators claim the “milk tickets” were proof that UBS had a parallel accounting system for keeping the transfers off its official books.

Only one “milk ticket” was found during the inquiry, prompting defence lawyers to argue there was no proof to justify claims of a massive fraud.

Yet prosecutors pointed to the roughly 3,700 French UBS clients who later took advantage of an amnesty offer to regularise their tax declarations with the French authorities.

UBS has been embroiled in a series of similar cases, most notably in the United States, where the authorities said the bank used Switzerland's banking secrecy laws to help rich clients avoid taxes.

In 2009 it paid $780 million to settle charges it helped thousands of American citizens hide money from the Internal Revenue Service, and agreed to turn over information on hundreds of clients, severely denting Switzerland's long tradition of shielding banking clients and their operations from prying eyes.

That case was also prompted by a former American UBS employee turned whistleblower, Bradley Birkenfeld, whose book “Lucifer's Banker: The Untold Story of How I Destroyed Swiss Bank Secrecy” was published in 2016.

Last November UBS was again sued by US authorities, who accuse the bank of misleading investors over the sale of mortgage-backed securities in 2006 and 2007, just before the financial crisis struck.

UBS has denied the charges and said it will defend itself “vigorously”.