Before The Bench 20 May 2014 5 years ago The Serious Fraud Office (SFO) continues to bring charges over the alleged rigging of Libor, the benchmark rate at which banks would borrow from each other. Nearly two years on from the SFO taking on the Libor case, it still seems to be the subject of lengthy investigation. Libor appears to be the saga without end. It was July 2012 when the SFO announced that it had decided to accept the Libor case for investigation. Three former employees of London-listed ICAP were charged over Libor rigging just over a month ago, which brought to nine the number of former City workers facing criminal trials over rate rigging. In late April, the number became a round dozen when three former Barclays staff had criminal proceedings issued against them. For something that was only known to those in the financial sector, Libor – the London Interbank Offered Rate – has become a general term to represent everything that the public has come to see as being wrong with the City and those who work in it. In a statement, the SFO has said that the three men charged over a month ago are alleged to have conspired to manipulate Libor between August 2006 and September 2010. The three had already been named by the US Department of Justice in connection with rate manipulation and each is facing one count of conspiracy to commit wire fraud and two counts of wire fraud. One worked as a cash broker at Libor in London, another worked in London for ICAP’s yen dealing desk while the third worked for ICAP in New Zealand. In September last year, ICAP paid a total of £55M in fines to settle with the US Commodity Futures Trading Commission and the UK’s Financial Conduct Authority FCA). These latest SFO charges follow charges that were brought in June and July last year and last February. A criminal trial has been set for next year for those charged in February, who all worked for Barclays. Barclays was the first bank to admit its involvement in attempts to manipulate borrowing rates and settled with the UK and US authorities back in June 2012. In the fall-out from this, the bank’s chief executive, Bob Diamond, chairman Marcus Agius and several other senior managers were forced to leave their positions. A former Citigroup and UBS trader is expected to be the first trader to face trial, along with two former employees of broking firm RP Martin. These were the first three to be charged in connection with Libor. The SFO is thought to be planning further charges against other individuals in connection with its ongoing investigation into Libor. Libor has been costly to banks’ finances and their reputations. Last year, Barclays paid fines of £290M and RBS had to pay £391M. The European Commission agreed Libor-related penalties with eight banks from across Europe that totalled £1.4 billion – the biggest ever anti-trust punishment handed out by the European body. It is a costly reminder to the banks of both the misdeeds they carried out in the past and the scrutiny they have to get used to in the present and the future. The activities of so-called rogue traders may have given the City a bad name in recent years but this should not come as a shock - there have always been incidents of market abuse. What is perhaps more surprising is the fact that they thought this would go undetected. Senior figures in banks – and all companies, for that matter – are more liable now than at any time in the past for both their activities and the conduct of those working for them on behalf of the company. The Bribery Act has made companies responsible for the activities of anyone working for them anywhere in the world in any capacity, however informal. The Companies Act 2006 and the Fraud Act 2006 have, like the Theft Act 1968, made directors, managers, chief executives and any other senior company figures criminally liable for wrongdoing carried out by or on behalf of the firm with either their consent, connivance or neglect. Whether Libor ever involved the consent of those “at the top’’ remains to be seen. The issue of consent suggests that anyone having at least some knowledge of illegal activity would be liable, while proving the proverbial turning of a blind eye would be enough for a prosecution to establish connivance. At this stage, only nine people have been charged over Libor. None has yet gone to trial and the evidence we are likely to hear is still either being found or is tucked away in defence and prosecution files. It is simply too early to establish whether the lack of corporate prosecutions at board level will indicate that the SFO and other agencies are struggling to prove criminal liability at the highest levels of companies when it comes to Libor – or any other example of serious corporate wrongdoing. Libor is not an issue for the Bribery Act. And yet senior financial figures would do well to recognise that this Act, combined with a number of other developments, make it impossible for them to excuse themselves from the corrupt, illegal behaviour of their staff, associates or representatives. The Bribery Act makes companies criminally responsible for the corrupt activities of their staff, agents and third parties anywhere in the world. Those at senior levels in a company have to know everything about the way it works – and how that work is being carried out. Consider also the Serious Fraud Office’s (SFO) desire to see more self-reporting of misconduct through either the current Code of Practice 9 arrangements or deferred prosecution agreements and the way it and other agencies now work increasingly closely with their foreign counterparts. The authorities are expecting banks and all other companies to be aware of what is going on under their roof – and they are teaming up with partners around the world to piece together an international picture of wrongdoing. Libor may prove to be a big test for the SFO. It has had more than its share of troubles and disappointments the last couple of years. Libor is a challenge to its ability and credibility. If it succeeds in securing a good number of convictions it will have saved some much needed face. If it fails, it will find itself in the awkward position of having to explain to government – a government that gave it extra resources for its Libor investigations - just why it has not been successful in court. Any Libor court cases are sure to look at who knew what, what was or was not reported, to whom it was reported and what action was taken. Evidence given will touch on the banks’ compliance procedures, the existence of whistleblowers (or at least any facilities that were available for people to blow the whistle) and any signs of a culture were wrongdoing was accepted, ignored or simply undetected. Any such evidence will be vital when it comes to determining the fate of those on trial. It may also have a huge effect on the professional standing or credibility of the employers of those who stand accused in the dock. But if anything is to be learned from what looks likely to be a decade of wrongdoing and subsequent investigation, it has to be learned by those in the City who know or at least suspect other incidents of wrongdoing. They can no longer continue to function with even the slightest suspicion that not everyone working for a bank, broker or trader is playing by the rules. A culture of openness and communication has to be developed and encouraged, with legal compliance and the encouragement of whistle blowing at the top of the agenda. Any such culture, however, can only succeed if those at the top show a genuine dedication to and involvement in creating it. Those under investigation over Libor may have to account for their actions sooner than most. But we are now in an era where the authorities are asking questions of all manner of companies. Whether it is the SFO, police, HM Revenue and Customs, the Financial Conduct Authority or any number of international organisations taking an interest in your business, the situation is clear. This is one rate of interest that cannot be ignored or manipulated.