NatWest Markets to pay $35M in penalties for fraud in US Treasury markets
London-based global banking and financial services firm NatWest Markets Plc pleaded guilty today to various fraud schemes in the markets for U.S. Treasury securities and futures contracts.
NatWest pleaded guilty to one count of wire fraud and one count of securities fraud in connection with a criminal information filed today in the District of Connecticut. U.S. District Judge Omar A. Williams accepted the pleas and sentenced NatWest to pay approximately $35 million in a criminal fine, restitution, and forfeiture.
NatWest also will serve three years of probation and will agree to the imposition of an independent compliance monitor.
According to court documents and NatWest admissions, between January 2008 and May 2014, NatWest traders in London and Stamford, Connecticut, independently engaged in schemes to defraud in connection with the purchase and sale of U.S. Treasury futures contracts. Separately, in 2018, two other traders employed at NatWest’s Singapore branch engaged in a fraud scheme in connection with the purchase and sale of U.S. Treasury securities in the secondary (cash) market.
In each scheme, NatWest traders engaged in “spoofing” by placing orders with the intent to cancel those orders before execution, attempting to profit by deceiving other market participants by injecting false and misleading information regarding the existence of genuine supply and demand in the market.
The spoof orders were designed to artificially push up or down the prevailing market price so that the NatWest traders could trade more profitably as a result of these schemes. In some instances, one of the NatWest traders took advantage of the close correlation between U.S. Treasury securities and U.S. Treasury futures contracts and engaged in cross-market manipulation by placing spoof orders in the futures market in order to profit from trading in the cash market.
The 2018 securities fraud scheme constituted a material breach of the Oct. 25, 2017 Non-Prosecution Agreement between the U.S. Attorney’s Office for the District of Connecticut and NatWest’s U.S. broker-dealer subsidiary, NatWest Markets Securities Inc. (formerly RBS Securities Inc.), and occurred while NatWest (formerly The Royal Bank of Scotland Plc) was on probation following its May 20, 2015 guilty plea and Jan. 5, 2017 sentencing for conspiring to manipulate the foreign currency exchange market.
A number of relevant considerations contributed to the department’s criminal resolution with NatWest, including the nature and seriousness of the offense, NatWest’s substantial prior history of other criminal conduct and civil and regulatory actions against it, its breach of a prior agreement, and the state of NatWest’s compliance program.