RBS 2014 Annual Report Download - page 111

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RBS – Interim Results 2015
Notes
16. Litigation, investigations and reviews (continued)
RBS is co-operating with investigations and new and ongoing requests for information by various other
governmental and regulatory authorities, including in the UK, US and Asia, into its submissions,
communications and procedures relating to a number of trading rates, including LIBOR and other interest
rate settings, and non-deliverable forwards. RBS is providing information and documents to the CFTC as
part of its investigation into the setting of USD, EUR and GBP ISDAFIX and related trading activities. RBS
understands the CFTC investigation is at an advanced stage. RBS is also under investigation by competition
authorities in a number of jurisdictions stemming from the actions of certain individuals in the setting of
LIBOR and other trading rates, as well as interest rate-related trading. At this stage, as there remains
considerable uncertainty around the outcome of these investigations, it is not practicable reliably to estimate
the aggregate impact, if any, on RBS which may be material.
Foreign exchange related investigations
In November 2014, RBS plc reached a settlement with the FCA in the United Kingdom and the United States
Commodity Futures Trading Commission (CFTC) in relation to investigations into failings in RBSG plc’s FX
businesses within its Corporate & Institutional Banking (CIB) segment. RBS plc agreed to pay penalties of
£217 million to the FCA and US$290 million to the CFTC to resolve the investigations. The fines were paid
on 19 November 2014.
On 20 May 2015, RBS plc announced that it had reached settlements with the DOJ and the Board of
Governors of the Federal Reserve System (Federal Reserve) in relation to investigations into its FX business
within its CIB segment. RBS plc has agreed to pay penalties of US$395 million to the DOJ and US$274
million to the Federal Reserve to resolve the investigations. The fines are fully covered by existing
provisions.
As part of its plea agreement with the DOJ, RBS plc pled guilty in the United States District Court for the
District of Connecticut to a one-count information charging an antitrust conspiracy. RBS admitted that it
knowingly, through one of its euro/US dollar currency traders, joined and participated in a conspiracy to
eliminate competition in the purchase and sale of the euro/US dollar currency pair exchanged in the FX spot
market. The charged conspiracy occurred between as early as December 2007 to at least April 2010.
Pursuant to the plea agreement (which is publicly available), the DOJ and RBS plc have agreed jointly to
recommend to the Court that it impose a sentence consisting of a US$395 million criminal fine and a term of
probation, which among other things, would prohibit RBS plc from committing another crime in violation of
US law or engaging in the FX trading practices that form the basis for the charged crime and require RBS plc
to implement a compliance program designed to prevent and detect the unlawful conduct at issue and to
strengthen its compliance and internal controls as required by other regulators (including the FCA and the
CFTC). If RBS is sentenced to a term of probation, a violation of the terms of probation could lead to the
imposition of additional penalties.
RBS plc and RBS Securities Inc. have also entered into a cease and desist order with the Federal Reserve
relating to FX and other designated market activities (the FX Order). In the FX Order, which is publicly
available and will remain in effect until terminated by the Federal Reserve, RBS plc and RBS Securities Inc.
agreed to take certain remedial actions with respect to FX activities and certain other designated market
activities, including the creation of an enhanced written internal controls and compliance program, an
improved compliance risk management program, and an enhanced internal audit program. RBS plc and RBS
Securities Inc. are obligated to implement and comply with these programs after they are approved by the
Federal Reserve, and are also required to conduct, on an annual basis, a review of applicable compliance
policies and procedures and a risk-focused sampling of key controls.