Title: The Rand-Dollar Exchange Rate Manipulation Scandal: Major South African Banks Laundered, Five Foreign Banks Still in the Viewfinder
Introduction:
In a ruling on Monday, the Competition Court of Appeal concluded that there was insufficient evidence to demonstrate that South Africa’s largest banks were part of an international conspiracy to manipulate the exchange rate between the South African rand and the US dollar. The decision also rejects the Competition Commission’s appeal against almost all foreign banks involved in the affair, leaving only five of them in their crosshairs.
The judgment thus rules out proceedings against Standard Bank, Nedbank and FirstRand, while BNP Paribas, JP Morgan Chase, HSBC, Credit Suisse Securities and Investec remain liable to be prosecuted. Other banks, such as Citbank and Standard Chartered, have already agreed to settlements with the Competition Commission.
A scandal that dates back to 2015:
The rand-dollar exchange rate manipulation scandal dates back to 2015, when it was revealed to the public. Since then, the Competition Commission has conducted an eight-year investigation, but its jurisdiction has been repeatedly questioned. According to the Court of Appeal for Competition Cases, the Commission must prove the existence of a single overall conspiracy in which all the banks involved participated, which would allow the commission to assert the jurisdiction of the court over all of the banks.
Insufficient proof of overall conspiracy:
In its 2020 affidavit to the court, the Competition Commission argued that communication between competing traders via chats on the Bloomberg instant messaging platform was evidence of an overall conspiracy. However, the court of appeal highlights the weaknesses of this proof. For example, she notes that the Commission “admits that it does not even know who the FirstRand Bank traders were and has no evidence that they participated in chats on the Bloomberg chatroom.”
The decision of the court of appeal:
The Competition Appeal Court concludes that the Commission’s accusations against Standard Bank are “skeletal” and that the case “does not cross the first legal lines”. Furthermore, it notes that the Commission was not aware of any contact between an employee of Standard Bank and an employee of another bank involved until more than four years after the alleged start of the conspiracy. These gaps in evidence led to the dropping of charges against South Africa’s major banks.
Conclusion:
The scandal of manipulation of the rand-dollar exchange rate has experienced a new twist with the decision of the Court of Appeal for Competition Affairs. The move clears South Africa’s biggest banks, but still leaves five foreign banks open to prosecution. This scandal, which dates back to 2015, has had a long legal journey, marked by questions of jurisdiction and weaknesses in the evidence presented by the Competition Commission. Now the case remains open for these five foreign banks, which could face prosecution for their alleged role in manipulating the exchange rate between the rand and the dollar.