Between 2007 and 2013, according to the New York Department of Financial Services, Standard Chartered's traders used chat rooms, emails and other communications to share confidential information improperly and try to manipulate trades.

The crusading department has housed its fine in a consent order, which marks the last in a series of DFS consent orders that follow a detailed investigation of manipulation in the foreign exchange markets. The investigation in this case found that bank traders used a range of illegal tactics to maximise profits or minimise losses at the expense of the bank’s customers or customers at other banks. In line with the consent order that the DFS issued, Standard Chartered admitted that it failed to implement effective controls over its foreign exchange business, which is conducted at its London headquarters and in its New York branch and elsewhere. The Standard Chartered group employs about 86,000 people all over the world and commands assets of US$663 billion.

The foreign exchange, or FX market, is the marketplace where banks and other financial entities seek to service customers and to profit by buying and selling foreign currencies.  FX dealers profit when they quote narrow spreads between the bidding and asking prices in currency exchanges.

The NYDFS has already issued fines of some $3.14 billion on Barclays Bank plc, BNP Paribas, Credit Suisse, Deutsche Bank, and Goldman Sachs to punish them for unlawful conduct in the foreign exchange trading business.

DFS’s investigation of Standard Chartered found that traders used chatrooms, e-mails, phone calls and personal meetings to attempt to rig transactions. The illegal activities uncovered included:

• the co-oordination of trading and spreads among traders;
• attempts to manipulate trading benchmarks;
• the sharing of confidential information about customers;
• trading to move prices in certain markets; and
• traders engaging in non-competitive agreements between each other on prices and spreads.

The misconduct occurred among salespeople and desk traders using 'voice' trading through telephone and electronic communications to buy and sell currencies at Standard Chartered trading centres in such cities as New York and London.

Between 2007 and 2013, the NYDFS says that traders based in New York and elsewhere joined traders at other locations in a chat room called 'the Old Gits.' The chat room was formed, it believes, so that they could co-ordinate trading, share confidential information and otherwise affect FX prices. One trader described the chat room to a new member as “a den of thieves.” Membership of the chat room was controlled by its members who voted on whether new members were trustworthy enough to join.

The DFS investigators found that traders regularly ignored guidance from regulators, as well as guidance from the bank itself, that was designed to protect the confidentiality of clients' information and to avoid situations involving trading on non-public information. The consent order says that when a trader in New York was questioned about sharing confidential information, he admitted that he had done so. One supervisor in New York, it goes on to say, admitted that he regularly participated in chat rooms where widespread and improper information-sharing occurred.

The DFS also found that Standard Chartered’s management failed to supervise the bank’s FX business and ensure compliance with rules, regulations and laws. The bank – which was trying to increase its FX business – was slow to identify risks and develop policies and processes to govern the business and ensure compliance. The bank had few policies or training strategies to guide staff about the line between proper and improper behavior.

The consent order obliges Standard Chartered to submit "enhanced written internal controls and compliance programmes" for approval by the NYDFS, manage risks better and establish an enhanced internal audit plan. The bank agreed to provide the department with progress reports.