Scotiabank to pay $127M in fines for traders' price fixing of precious metals
Fines are for failing to detect, stop traders from making fake trades designed to manipulate prices
The Bank of Nova Scotia has agreed to pay more than $127 million US in fines to settle criminal investigations into a price manipulation scheme in the price of precious metals that some of its traders were engaged in.
The bank has agreed to a deferred prosecution agreement (DPA) to settle separate probes by the Department of Justice and the U.S. commodities regulator, the Commodity Futures Trading Commission (CFTC).
According to an agreed upon statement of facts, between January 2008 and July 2016, four precious metals traders employed by Scotia in New York, London and Hong Kong made bogus trades to try to manipulate the price of gold, silver, platinum and palladium futures contracts.
The traders "attempted to rig precious metals futures prices in their favour by placing thousands of orders they knew they would cancel before the trades were executed," U.S. Attorney Craig Carpenito said, describing a financial practice known as "spoofing."
"In this way, they sought to illegally manipulate the market to their own advantage and to the disadvantage of other traders."
'Failed to detect' unlawful trading practices
The bank is being punished because its compliance department "failed to detect or prevent the four traders' unlawful trading practices," the Department of Justice said.
"Between August 2013 and February 2016, three Scotiabank compliance officers possessed information regarding unlawful trading by one of the traders ... but failed to prevent further unlawful conduct by this same trader," the Department said.
The fines consist of $60.4 million to the Department of Justice with the remainder going to the CFTC in the form of two monetary penalties of $42 million and $17 million.
Scotiabank was already forced to pay $800,000 US in 2018 for the matter, but the CFTC now says the company made false statements during the organization's investigation necessitating another $77.4 million in payments.
As part of the DPA, Scotiabank has agreed to continue to co-operate with the department in any ongoing investigations and prosecutions relating to the underlying misconduct, to modify its compliance program where necessary and appropriate and to retain an independent compliance monitor for a period of three years.
"At Scotiabank, we understand that in order to maintain the trust of our stakeholders, we must adhere to trading-related regulatory requirements and compliance policies," the bank said in a statement Wednesday. "We are committed to adhering to these standards."
With files from The Canadian Press