Crypto Records Another Advantage as Banking Giants Fined Billions for Malpractice


Global banks have come under intense pressure as US and European regulators are imposing heavy sanctions on them for their misconducts. The sanctions are set to rise up to $400 billion by 2020 according to reports by Quinlan and Associates.

Reports as such provide a big vote of confidence for cryptocurrency. In Bitcoin’s public ledger for example, the incentives to launder money or coerce with the intent of submitting false information is near impossible thanks to the transparency and verification checks in place.

Banks have been accused on numerous occasions of facilitating money laundering and outright manipulation.

In April, two federal regulators, the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC), fined Wells Fargo $500 million each for charging unfair interest fees on mortgages and forcing customers into unnecessary car insurance schemes.

Only recently, the Commodity Futures Trading Commission (CFTC) fined JP Morgan Chase Bank $65 million for failing to prevent their traders from fixing the US Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX) between 2007 and 2012.

The CFTC penalized JP Morgan Chase for publishing false interest rates just before the daily reference point snap shot was taken between 2007 and 2012. By knowingly submitting false data, the bank’s derivative positions benefited at the expense of other interest rate products which depended on the common interest rate value. This is because aside from being a cash settlement option for interest rate swaps, the index acted as a valuation tool for other interest rate products which the Swaps Broker distributed to panel banks.

Developed in 1998 by the International Swaps and Derivatives Association (ISDA), Thomas Reuters and NEX Group PLC, ISDAFIX is a reference rate value important for fixed interest swap rates. The ISDAFIX fixes are determined by the US Dollar, Swiss Franc, British Pound and Euro.

These rates were published every day from Monday to Friday at 11AM Eastern time and meant to represent the “prevailing mid-market rate, at a specific time of day, for the fixed leg of a standard fixed-for-floating interest rate swap” according to the CFTC.

JP Morgan Chase bank is not the only bank to be fined.

BNP Paribas was fined $90 million by the CFTC when investigations found that traders of the bank’s investment wing were actively bidding and executing trades at around the 11AM rate submission time. This way they deliberately influenced the USD ISDAFIX index affecting products as LIBOR and foreign exchange benchmark rates. The Royal Bank of Scotland was also charged $85 million for similar offenses committed during the same time frame.

For compliance, reports indicate that global banks are now spending more than $500 million dollars for compliance purposes and lawyers. This is regardless of their tough insistence of Know Your Customer (KYC) details and regulator enforcement of Anti-Money Laundering rules.

Last week, the CEO of Danske Bank, Thomas Borgen resigned after reports by Business Insider claimed the bank’s Estonian branch was involved in a money laundering scandals running to their billions following an investigation. Criminals ran 9.7 million transactions between 2007 and 2015 laundering $234 billion from around 10,000 non-resident accounts.

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