Following the news that the first arrests have been made in the Libor rate rigging probe being conducted by the Serious Fraud Office (SFO), the question being asked is what laws can be used to prosecute the people charged.
The three men arrested yesterday (December 11th 2012) by City of London Police, have not apparently been charged with wrongdoing and have now been bailed pending further enquiry.
The arrests are in connection with allegations that major financial institutions across the world conspired to manipulate key borrowing rates. Further arrests are expected as the investigation continues.
However, there is no specific piece of legislation under UK law that covers the men’s alleged actions, although there are a number of laws that could be applied.
The laws that might be used include the 1968 Theft Act, which can apply to cartels, the 2006 Fraud Act and the common law offence of conspiracy to defraud.
Section 17 of the Theft Act, for example, created the crime of false accounting, which might be used if the SFO could prove that the traders’ Libor submissions amounted to a form of accounting, although they are generally accepted to be estimates rather than accounts.
While the Fraud Act could potentially be used, although for it to be solid, the SFO would need not only to identify dishonest conduct but also provide proof of actual gain or loss, which would be very difficult.
However, the conspiracy to defraud law, although still very difficult, might work, as the SFO would need to prove that two or more parties had agreed dishonestly to prejudice the economic interests of another, which might just be possible.