Surveillance teams in dark over antics of traders as regulator slaps fine on bank.
Wall Street giant Goldman Sachs can add another notch to the tally of fines generated by the loose fingers of traders in electronic chatrooms, after it agreed a $110m penalty to settle allegations staff unlawfully exchanged client and market information.
The New York Department of Financial Services and the Federal Reserve Board alleged that from 2008 to 2013 Goldman “engaged in unlawful, unsafe and unsound conduct” by failing to implement effective controls over its foreign exchange business.
Messages from the internal Goldman chat logs are sure to embarrass the Wall Street giant once said to be “doing God’s work” by its outgoing CEO Lloyd Blankfein, as they involve traders nicknaming one customer “Satan”, while sharing tips on what else is going on in the market.
Goldman’s surveillance teams were allegedly not notified, its compliance team was in the dark, and even when the problems were flagged by some sales staff, they were not acted upon.
Central to the investigation were multi-party electronic chat rooms, where traders, sometimes using code names, discreetly shared confidential customer information, discussed potentially coordinating trading activity and other efforts to affect currency prices, as they branded customers, with other nicknames including “dodgy Aussie seller” and “fiddler”.
In chat dialogue cited by investigators, specific information was given about the position of a customer that traders branded “Satan.” At one point, one trader said: “I remember the old days, your satan info was legendary”.
In another chat from 2008, individuals at other banks goaded the Goldman trader into revealing information about the customer. The Goldman employee quickly responded by providing confidential information concerning recent trades: “satan sells 8 euros at 17”, indicating $8m worth of euros at an identified price.
In early 2009, a senior member of the Goldman sales team located in London sent an email to traders that attached an updated policy governing “what we can say internally and externally with respect to customer trades and orders”.
Several weeks later, that person specifically raised concerns about sharing of confidential customer information, but there was no evidence that Compliance was notified.
Following the NYDFS investigation, Goldman carried out an internal investigation in regard to both its “voice” and electronic trading segments of its forex trading business.
Yet again, poor surveillance combined with a compliance team out of the loop has resulted in a multi-million dollar fine for a bank that has never been known to scrimp on resources.
Goldman was also dinged $120m in December 2016 by the Commodities and Futures Trading for attempted manipulation of the foreign exchange market, which also emerged in chat logs, but appears to have not learned its lesson, and the penalty is the latest in an ever growing line of misconduct charges that begin in the chatrooms.•