Barclays fined for gold scam

London-based Barclays Plc has been fined 26 million pounds ($43.8 million, 32.2 million euros) because failures in the bank's internal controls allowed a trader to manipulate the setting of gold prices in order to defraud a client.

The trader's fraudulent actions occurred on June 28, 2012, just one day after Barclays had been fined $450 million for its participation in rigging Libor interest rates.

"A firm's lack of controls and a trader's disregard for a customer's interests have allowed the financial services industry's reputation to be sullied again," said Tracey McDermott, the FCA's Director of Enforcement and Financial Crime.

The FCA said it had banned former Barclays trader Daniel James Plunkett and fined him 95,600 pounds. Plunkett was a director on the precious metals desk at Barclays, responsible for pricing financial products linked to the price of precious metals.

Plunkett mis-fixed the gold price in order to avoid the payment of $3.9 million to a customer under an option. His scam boosted his own trading book by $1.75 million. The bank later compensated the client in full.

Barclays struggles to restore its damaged reputation

Barclays CEO Antony Jenkins is attempting to restore the bank's reputation after a series of scandals. He has admitted its high-risk, high-reward culture had to change, and claimed that systems and controls were improving.

"We very much regret the situation that led to this settlement ... these situations strengthen our resolve to improve," Jenkins said.

The FCA said Barclays co-operated with the investigation, which reduced its fine by 11 million pounds.

Price-fixings by banks under increased scrutiny after Libor scandal

The Libor rigging scandal has increased scrutiny of how all benchmark prices are set, including London's gold "fix", which dates back to 1919.

Barclays was the first bank to be fined for participating in the manipulation of Libor (London Inter-Bank Offered Rate), a system-wide basic interest rate from which most other interest rates are calculated. Libor underpins trillions of pounds worth of loans and financial contracts.

Several other banks involved in the Libor rigging scam have since been fined more than Barclays was. Deutsche Bank took the largest hit, with a 725-million-euro fine.

On 27 July 2012, the Financial Times published an article by a former trader that stated that Libor manipulation had been common since at least 1991.

Insiders knew of rate-rigging practices for years, but no changes were made until their emergence into public awareness in the past few years generated scandals. Some price-fixing procedures are now under review by banking regulators. The daily London fixing of silver prices will end in August, and greater regulatory attention is being paid to how all precious metals prices are set.

Banks arrive at the gold fix through matching buy and sell orders during a twice-daily telephone call. Miners, jewellers and central and commercial banks use the price fix to trade gold.

The FCA and several other regulators, including Bafin in Germany and the U.S. Commodity Futures Trading Commission, have indicated they are looking at the gold fix.

In years gone by, seats at the gold and silver fixing tables were a mark of distinction for a bank. But now, most banks do not want to be involved.

nz/hg (Reuters, AP)