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Legal Minds

12 July 2018 / by / in

The SFO loses its appetite for “low hanging fruit”

The decision by the SFO not to prosecute former employees of Lloyds Banking Group for alleged manipulation of LIBOR because the case “has not met the threshold required for prosecution” suggests that a degree of sanity has at last been applied to the charging process. However, it will provide cold comfort to employees of the other major banks who have already been prosecuted and convicted on very similar evidence.

Lest we forget on the 28 July 2014 the FCA concluded in their Final Notice against Lloyds Bank and HBOS:

“The Firms, because of a poor culture on their Money Market Desks and weak systems and controls, failed to prevent the deliberate, reckless and frequently blatant actions of a number of their employees”.

This conclusion mirrored similar findings in Final Notices against other major banks including Barclays, UBS, RBS, Rabobank and Deutsche Bank. Traders from UBS and Barclays were subsequently prosecuted for LIBOR manipulation related offences. Several were convicted and are currently serving prison sentences.

If one reads the Final Notices with care, the same patterns of behaviour are described primarily by the reproduction in the notices of “incriminating” email traffic. The SFO have conducted a meticulous trawl of electronic communications between traders and submitters spanning a considerable period of time. It seems unlikely that the absence of sufficient evidence of offending communications was the basis for dropping this case.

A possible explanation may be a concern that the humiliation of the SFO’s key expert witness, Saul Hayden Rowe, in the re-trial of two Barclays traders who were acquitted in April 2017, introduced a degree of uncertainty about the credibility of the prosecution case as to the correct understanding of the LIBOR test and its practical application. It certainly prevented the SFO from relying on his evidence in any subsequent trial.

In the appeal of Alex Pabon (a convicted Barclays trader) earlier this year his defence team sought to argue that had the deficiencies of Rowe’s evidence been known at their client’s trial, the outcome might have been very different. The Court of Appeal did not consider it within their remit to step into the shoes of a jury and speculate about how they might have decided a case had the evidence of Mr Rowe been similarly discredited as it was in the re-trial of two of the co-defendants a year later.

However, one can only imagine how the defendants who were convicted in the earlier LIBOR trials now feel about a decision not to prosecute traders at another bank where the evidence seems on the face of it to be identical. If the position in fact is that the SFO simply do not feel that the public interest is served any longer by prosecuting a small number of traders for a practice that was tacitly endorsed, if not actively encouraged, by their employers, then it must call into question the whole premise upon which these prosecutions were mounted.

The real mischief identified by the FCA investigations was the complete lack of internal controls, procedures and training to prevent the traders from manipulating LIBOR. They identified that the fault lay with the banks themselves and that the appropriate punishment was financial combined with mandatory implementation of the necessary internal procedures and controls.

With the passage of time the decision by the SFO to prosecute individual traders begins to look increasingly gratuitous.


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Steve is a highly experienced criminal lawyer specialising in white collar and business crime for over 25 years. He has defended in cases brought by the Serious Fraud Office (SFO), HM Revenue and Customs, Department of Business Innovation and Skills (BIS), the Economic Crime Unit (ECU), NHS Counter-Fraud Service and the Crown Prosecution Service (CPS).