LIBOR rigging and the importance of compliance training

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Posted in:Banking and Finance|June 24, 2015 | Join the mailing list

The LIBOR rigging scandal that has enveloped several major banks in recent years has shone a light on the importance of compliance training to businesses of all sizes.

Employers very often remain responsible for the actions of their employees during the course of their duties, and even in some instances outside the course of their duties, and so it is essential that proper and effective compliance training is provided to
minimise the risk to employers of any employee misconduct.

The LIBOR rigging scandal centres on employees of several different banks who allegedly colluded to “rig” the London Inter-Bank Offered Rate (LIBOR). The LIBOR rate is used as the benchmark for billions of pounds worth of loans, mortgages and financial products
traded around the world. The rate is set by a group of major banks, who are asked to provide the rate at which they could borrow funds from other banks. The banks confidentially send their results for a range of loan types and the averages are then used to
set the LIBOR rate. However, it has been alleged that employees of some of the banks deliberately colluded to submit rates that would move the overall LIBOR rate in a direction that suited them best.

One of the individuals currently being prosecuted for alleged LIBOR rigging, Tom Hayes a former trader at UBS and Citigroup, has stated that he received “no compliance training” and that “no rules were outlined” regarding his involvement with setting the LIBOR
rate. Therefore he states that he was confused about what rules may have been broken and what the relevant regulations were.

If this is true, then the lack of compliance training and proper risk management has potentially contributed to this scandal, which has severely damaged the reputation of the banks involved and has involved Mr Hayes former employer, UBS, being fined £160m by
the Financial Conduct Authority in the UK, along with approximately $150bn worth of fines worldwide for their involvement in LIBOR rigging.

This issue is by no means limited to the banking industry and it serves to highlight the need for businesses to implement clear and appropriate compliance training for their employees in order to advise them on how to comply with the legal, ethical and policy
related aspects of their employment. The potential costs, both financially and in respect of reputation, of not providing this training could be severe. As the saying goes, reputations take years to build and only seconds to lose.

It may not simply be enough for an employer to provide the requisite training and expect that this will cover them for any potential wrong-doing of their employees. Businesses need to ensure that they engender a culture that supports the compliance requirements
and that it is not simply treated as a “tick-box” exercise. Compliance training works best when it is tailored to an employee’s role and deals with real world situations.

A business that has a strong compliance structure in place will minimise its exposure to wrongdoing and hopefully maintain a strong reputation within its market.

For more information about any of the above or for practical commercial advice on this or any other aspect of employment law, please contact
Nigel Crebbin of the berg Employment team on 0161 833 9211 or email him at

Follow us on Twitter: @Berg_HR

(The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by berg or any of its partners or employees. Professional legal advice should
be obtained before taking, or refraining from taking, any action as a result of this article.)

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