Global Regulation, Local Solutions Emerging Themes 2020 - Page 55



FINANCIAL CRIME AND INVESTIGATIONS
EMERGING THEMES 2020
CONCLUSION
Over the last decade, competition authorities
around the world have pursued multiple
investigations across the financial services
sector and imposed billions of pounds of fines
on banks and other firms. Several individuals
have faced criminal prosecution.
Whilst the US authorities initially led this charge,
enforcement activity in Europe has included:
X
A European Commission investigation
into anti-competitive behaviour in foreign
exchange (“FX”) spot trading, which led to
fines of a combined total of €1.07 billion in
May 2019
X
The Commission’s imposition of fines totalling
€1.3 billion for manipulating the Euribor
benchmark
X
The imposition by the FCA of its first
competition law fine, in the asset
management sector, in February 2019
X
Ongoing investigations in the bonds sector
(by both the Commission and the UK’s
Competition and Markets Authority), the
aviation insurance sector (by the Commission)
and FX (by the Commission).
Most financial services firms have long
been aware that this change in focus for
the authorities, away from the industrial
and manufacturing sectors, has created a
significant new compliance risk. What is now
emerging, as a result of this increased public
enforcement drive, is a concurrent increase in
legal claims from organisations and individuals
that have allegedly suffered loss as a result of
the anti-competitive conduct.
In 2015, the UK introduced a collective actions
procedure which allowed for US-style “opt out”
class actions to the English courts, making it
easier for claimants with lower value claims,
including end consumers, to pursue claims. EUwide procedures remain under consideration.
Of the five collective actions that have so far
been filed in the UK, two have concerned the
financial sector – a collective action seeking
£14 billion in damages against Mastercard
in relation to interchange fees, and a claim
against five banking groups in relation to
FX manipulation estimated to be worth up
to £6 billion. Both claims are at an early stage,
with the UK’s Competition Appeal Tribunal
yet to determine whether those claims
should proceed beyond the initial class
certification stage.
EUROPEAN COMMISSION FINES
Given the global nature of
the financial services
industry, financial institutions
that have been found to
have engaged in anticompetitive behaviour are
likely to face lawsuits in
multiple jurisdictions from
those claiming to have
suffered loss. Local solutions
may be most effective for
this global problem – whilst
early settlement of US class
actions may be the wisest
move, the smart money is,
for now, on fighting the
collective actions in the UK.
The biggest unresolved issue in the UK collective
actions regime is the extent to which damages
claimed on behalf of a class must represent an
accurate measure of each individual claimant’s
losses. This reflects English law principles that
any damages awarded in litigation must be
purely compensatory, whilst under US law
punitive damages are available.
This has been the key issue in the collective
action against Mastercard. That claim was
initially dismissed by the Tribunal as the
claimants struggled to calculate losses
on behalf of the class.
COLLECTIVE ACTIONS FILED IN THE UK
€1.07bn
€1.3bn
€14bn
€6bn
FX
anti-competitive
behaviour
Euribor
benchmark
manipulation
Mastercard
interchange
fees
FX manipulation
claimed against
5 banking
groups
However, following a successful appeal it
has been remitted to the Tribunal for further
consideration. Whilst settlements have been
secured in a LIBOR class action in the US,
LIBOR-related claims have proved difficult for
claimants to quantify even on an individual
claim basis in the UK. Similar issues are likely
to arise in the FX collective action. As long as
fundamental questions such as this remain
unanswered, defendants may be less inclined
to settle collective actions brought in the UK.
Those cases lag well behind the equivalent
cases in the US, where in 2018 the FX and
interchange fee class actions settled for
approximately $2.3 billion and $6 billion
respectively. However, those earlier stage
settlements reflect the fact that class actions
have existed in the US for decades and the
“big issue” legal principles have long since
been resolved.
SARAH WARD
Associate Director,
London
54/
ANDREW LEITCH
Associate,
London
/55

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