CADE investigates alleged manipulation of rates involving foreign currencies through prior communication on digital platforms.
The General Superintendence of the Administrative Council for Economic Defense (CADE) is going to suggest sentencing some international banks and individuals who took part in the so-called offshore foreign exchange cartel, Valor has learned.
The case was filed in July 2015 and investigates alleged manipulation of exchange rates in the market involving foreign currencies, specifically in the spot foreign exchange market, using prior communication on digital platforms. The antitrust watchdog began investigating the case following a leniency agreement that provided documents and evidence against those under investigation.
In addition to the CADE investigations, the case has taken on criminal and civil consequences in Brazil, as well as investigations by other bodies—individuals have already been convicted by the Central Bank and are facing criminal charges in the courts. In 2021, the Brazilian Foreign Trade Association (AEB), which represents some of the country’s largest exporters, asked for compensation of almost R$20 billion from 19 banks accused of taking part in the cartel.
Valor has learned the technical area will suggest convicting seven banks and seven individuals who operated in the market. Around 30 operators and institutions were investigated, but some have signed agreements with CADE with the payment of pecuniary contributions and committing themselves to ceasing their conduct. Therefore, they will not be subject to trial.
After the Superintendence’s opinion, which could come out by the end of August, the case will be judged by the seven-member CADE plenary. One of the members has already indicated his impediment and will not take part in the trial. Diogo Thomson was a member of the technical area during the investigation.
The banks that will be fined and required to stop the practice by CADE will be Credit Suisse AG, UBS AG, Standard Chartered Bank, MUFG Bank (The Bank of Tokyo-Mitsubishi), Banco Inbursa, Bank of America Merrill Lynch Banco Multiplo (BofA) and Nomura International.
There is a parallel investigation at CADE into the manipulation of the Brazilian foreign exchange market, which could lead to the conviction of local banks, but this will not be concluded yet, as the agency’s technical department believes that more time is needed to analyze it.
In the case involving the international banks, CADE is also investigating manipulation related to the Brazilian currency, as well as manipulation of foreign exchange market benchmarks, such as those of the Central Bank of Brazil (Ptax), WM/Reuters, and the European Central Bank (ECB).
The anti-competitive practices, according to CADE, had effects in Brazil and may have allowed the operators participating in the conduct to better position themselves to make profits and avoid or minimize losses, to the detriment of customers. The conduct possibly began in 2007 and lasted until at least 2013.
The price agreements were made possible through chat groups on the Bloomberg platform, both in Brazil and abroad. Since the investigation was opened, CADE’s General Superintendence pointed to “strong indications” of anti-competitive conduct consisting of fixing prices and commercial conditions and sharing competitively sensitive information.
According to the technical area’s documents, the discussions between the competitors dealt with agreements to fix prices and commercial conditions, specifically through agreements to fix offers or price levels, influence reference indices in the foreign exchange markets, coordinate proposals for clients, coordinate the purchase and sale of currencies, hinder or even prevent certain operators from operating in the foreign exchange market.
According to the General Superintendence, competitors also shared commercially sensitive information about the market—such as information about trades, contracts, futures prices, client orders, trading strategies and objectives, and even confidential positions in specific trades and orders.
“Although the spot and futures foreign exchange markets involve thousands of daily transactions worldwide, it is estimated that among the potential clients affected are banks, investment funds, individuals, private companies, government entities, among others,”
CADE pointed out at the opening of the investigation.
Source: Valor International
