HSBC had previously cleared forex traders

HSBC Canary Wharf close-up

HSBC conducted its own internal investigation into a $3.5bn (£2.65bn) currency trade over which two of the bank's top traders were charged yesterday, it has been revealed.

The Financial Times reported that an internal investigation by HSBC three years ago found nothing wrong with the transaction.

The bank allegedly conducted the review after a foreign exchange scandal erupted in 2013, but found no breach of conduct from the transaction, which is said to have boosted sterling ahead of a deal, netting the bank $8m in profit.

Yesterday two HSBC currency traders, including its London-based global head of foreign exchange, were charged by New York investigators looking into rate-rigging, currency fixing and manipulation.

FBI agents stopped Mark Johnson at JFK airport, charging him with conspiring to defraud a client. A warrant has also been issued for the arrest of Stuart Scott, HSBC's former head of foreign exchange trading in Europe.

The pair are alleged to have engaged in front-running, a form of fraud where individuals buy or sell financial instruments ahead of upcoming orders from clients and customers to cash in on anticipated market movements.

Bloomberg reported this morning that the trade involved FTSE 250-listed Cairn Energy, which hired HSBC in 2011 to convert the sale of its Indian subsidiary to another London-listed firm, miner Vedanta Resources, from dollars to sterling.

Johnson and Scott are alleged to have bought sterling ahead of teh transaction, knowing the exchange rate would spike once it had been processed.

HSBC has not responded to requests for comment.

Full story: HSBC had previously cleared forex traders: City A.M.

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