The Competition Commission’s long-running currency manipulation case has been torn apart by a court, as most of the local and foreign commercial banks charged by the regulator may not face prosecution. This is because the commission has failed to assemble sufficient evidence to implicate them in wrongdoing.

The Competition Appeal Court has dismissed the inclusion of 23 of the 28 commercial banks implicated in the commission’s case of rigging trades involving the US dollar-South African rand currency pair more than a decade ago.

Only five commercial banks, mostly foreign banks, will now proceed in the commission’s case and possibly face prosecution through a trial. The banks include JPMorgan Chase, HSBC, BNP Paribas, and Credit Suisse, which pleaded guilty to charges brought by the US Department of Justice a decade ago. 

The fifth bank set to face prosecution is Investec, which did not join other banks in asking the commission, at the Competition Appeal Court, to show them evidence that their currency traders were part of the alleged “single overarching conspiracy” to manipulate the rand from 2007 to 2013.

In March 2023, the Competition Tribunal, which acts as a court on competition and antitrust matters, ruled that it was ready to hear the merits of the commission’s case, which was launched in 2017. However, the banks approached the Competition Appeal Court, arguing that they needed evidence on a series of issues before the case could begin.

Most of the South Africa-based banks that challenged the commission at the Competition Appeal Court, including Nedbank, FirstRand, Standard Bank, or their holding companies, had their cases thrown out due to lack of evidence. 

Vague evidence 

The court’s judgment against the commission, which was delivered on Monday, 8 January 2024, was scathing about how the competition regulator assembled its case against the banks. The court found that the commission relied on vague evidence and insufficient facts to support its case.

Bank traders at 28 local and international banks were accused by the commission of entering into a general agreement or “single overarching conspiracy” to collude on prices for bids, offers and bid-offer spreads for spot trades in relation to currency trading from 2007 to 2013. In doing so, they allegedly used platforms such as the Reuters currency trading platform and the Bloomberg instant messaging system (chat room), as well as telephone conversations and meetings, to coordinate their alleged collusive trading activities.

However, the Competition Appeal Court found that there was insufficient evidence proffered by the commission that joining the messaging systems or being part of them would automatically constitute traders partaking in a “single overarching conspiracy” to rig currency trades. 

During the hearing of the matter in court, the commission made the following argument: “As members or alternatively participants in implicated chatrooms, the respondents’ traders [the currency traders] knew of the conduct planned or put into effect by the other participants of the conspiracy to implement the terms or further the objective of the conspiracy; or they could reasonably have foreseen it and were prepared to take risk.”

The Competition Appeal Court did not accept this argument as it found that the commission did not give clear examples of individual traders participating in alleged currency rigging. The court heard submissions from banks that the Reuters and Bloomberg information and messaging platforms, which the commission relied on for its case, were primarily platforms for news and where trades were not executed.

In building its case against commercial banks, the commission made rookie errors, including incorrectly linking currency traders to banks that they did not work for.

For example, the commission insisted that Jason Katz and Louis Friedman worked for Standard New York Securities as currency traders even though the company corrected the competition regulator, informing it that the pair instead worked for Standard Americas.

“The Commission, knowing these facts and knowing therefore that it was the twenty eighth respondent [Standard Americas] who employed the said Katz and Friedman, should have desisted from attempting to join [in its case] the sixth respondent [Standard New York Securities],” read the Competition Appeal Court’s 79-page ruling.

In its currency manipulation case, the commission also implicated in wrongdoing the holding or parent companies of commercial banks. The Competition Appeal Court’s ruling found this to be a wrong move by the commission.

“A holding company which is not registered as a bank, not authorised to trade in foreign currency and whose role is simply shown to be that one of the subsidiaries traded in foreign currency cannot on this alone be included in the referral affidavit [the commission’s court documents detailing its case],” read the court’s ruling.

This is why the commission’s case against the parent companies of Nedbank, FirstRand, Credit Suisse, and Bank of America was thrown out. 

The Competition Appeal Court also found the commission failed to demonstrate that foreign banks, including Australia and New Zealand Banking, Commerz Bank, Nomura, and HSBC Bank USA, conspired with South African-based banks to rig the rand — bringing into question whether the commission has jurisdiction to bring charges against foreign entities.

There are few banks that the commission can now prosecute in its case. 

UK-headquartered Standard Chartered recently entered into a settlement agreement with the commission and admitted wrongdoing. It agreed to pay an administrative penalty of R42.7-million. Citibank paid an administrative penalty of R69.5-million in March 2017, while Barclays plc, Barclays Capital, and Absa were cooperating with the commission to be granted leniency. DM