Westpac and ANZ Become Entrenched in FX Conduct Scandal

The Australian financial regulator has accepted from the banks enforceable undertakings totaling AUD 6 million.

The Australian Securities and Investments Commission (ASIC) identified two more banks that have failed to adhere to honorable practices in their FX business. The ANZ and Westpac, which are the fourth and the second largest in Australia, committed to address inadequacies within their wholesale FX businesses.

As a result of ASIC’s investigation, the banks have also pledged to give AUD 6 million to charity.

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The wrongdoings at the Australian banks occurred between the 1st of January 2008 and the 30th of June 2013.

Commenting on the matter, ASIC Commissioner Cathie Armour said: “The foreign exchange market is a systemically important market that depends on all participants acting with integrity and fairness. ASIC is committed to ensuring that major financial institutions have the systems in place to ensure that financial services are provided fairly, honestly and efficiently.”

The news follows similar undertakings taken by ASIC against National Australia Bank Limited and the Commonwealth Bank of Australia. The companies made voluntary contributions of $2.5 million each. The funds were directed to fund independent financial literacy projects in the country.

ANZ and Westpac Wrongdoings

ASIC’s findings on Westpac and ANZ show that employees of the companies engaged in inappropriate conduct in its spot FX business between the 1st of January 2008 and the 30th of June 2013. On a number of occasions, the personnel of the banks disclosed confidential details relating to client entry orders to external traders in the spot FX market.

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Employees were also using code names to describe the market players. A case when the bank’s employees entered and subsequently cancelled offers on a trading platform outside of market making has also been identified. Normally banks are allowed to engage only in hedging activities related to market making.

Irregular fixing activity relating to confidential information disclosure about FX market orders was also present with orders relating to both internal market making operations and external clients.

At least one Westpac employee as well as a particular spot FX ANZ trader were identified as changing a proprietary position just before the fix. In both cases they received confidential information about another institution’s fix orders.

On a different occasion one of the Westpac’s staff disclosed a confidential Westpac fix order information to another institution to benefit a joint personal account trading strategy.

An independent consultant has been appointed by ASIC to assess the measures that Westpac and ANZ are taking to fix their systems. The regulator states that the supervision of employees was inadequate and led to the number of wrongdoings.

Westpac will make a community benefit payment of AUD 3 million to support the financial capability of vulnerable people including women experiencing family violence, the elderly and youth at risk. ANZ will contribute AUD 3 million to Financial Literacy Australia.

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