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US and UK authorities are at odds over how and when to interview key traders in London as part of a trans-Atlantic probe of the manipulation of benchmark interest rates, potentially complicating efforts to build a complete picture of the scope of the alleged bid-rigging.
In London, the Financial Services Authority, the top UK financial regulator, is seeking to interview traders ahead of a timetable the Justice Department has for interviews.
To be sure, probes in the United States and the United Kingdom have made progress. Barclays paid US$453 million (NZ$558m) in June to settle US and British inquiries into the Libor benchmark, and prosecutors have homed in on traders in New York.
But criminal defence lawyers representing some foreign traders say they are struggling to figure out who is ultimately calling the shots without the common practice of civil regulators deferring to criminal counterparts.
In some cases, the differences could limit cooperation between the agencies. If criminal prosecutors decide to bring charges against an individual who previously spoke to the FSA, for example, they are legally required to document and source each fact to prove they did not derive it from the UK interviews.
While technical, the legal manoeuvres are adding challenges to already complex cases that involve banks and traders in New York, London, Singapore, and Tokyo, and at least three rates pegged to the dollar, euro and yen.
The friction comes as some UK critics complain that US regulators are themselves being overzealous against London-based firms. They point to a threat by a New York regulator to strip Standard Chartered of its state banking license, the Barclays settlement, and a U.S. Senate panel's scathing report about HSBC's efforts to police suspect transactions.
In the Libor probe, a former top DOJ official who is not involved in the Libor investigation said the British regulator's more aggressive timetable with traders could potentially corrupt evidence used in bringing criminal charges.
US and UK authorities do not publicly acknowledge a rift.
A DOJ spokeswoman said the department has a longstanding policy encouraging its attorneys to coordinate with other agencies and appreciates the assistance provided by law enforcement partners in the United States and abroad.
Martin Wheatley, managing director of the FSA, told Reuters on Thursday that he is not aware that any of the multiple investigations have hindered the overall progress of the probes.
"We have an open gateway that allows us to share information," Wheatley said.
Regulators around the globe are probing more than a dozen banks for allegedly manipulating Libor, the global borrowing cost benchmark that is used in contracts worth trillions of dollars globally.
A handful of traders at banks, including Barclays, UK-based Royal Bank of Scotland and Switzerland's UBS AG, have come into the sights of authorities.
While federal prosecutors in Washington have begun reaching out to lawyers for some of the individuals under scrutiny to discuss cooperation and plea agreements, some cases that are still in the early stages of investigation have been complicated by the US-UK friction.
While US citizens can decline to testify before civil authorities if they are worried about criminal charges, foreign traders are being forced to testify before the FSA, sources familiar with the matter said.
Generally, civil and criminal regulators in the United States cooperate on parallel investigations, with civil authorities deferring to their criminal counterparts to avoid jeopardizing a criminal case.