The top US derivatives regulator is investigating cases involving foreign bribery, a senior official revealed on Wednesday in a warning shot to global commodities traders.
James McDonald, the director of enforcement at the Commodity Futures Trading Commission, warned in a speech that the agency had “open investigations” in overseas corruption cases.
The Department of Justice has historically taken the lead in criminally prosecuting bribery outside the US by using the Foreign Corrupt Practices Act, often in partnership with the Securities and Exchange Commission, which can impose civil penalties.
Mr McDonald said at a conference in New Orleans the CFTC would work alongside the DOJ and SEC with the aim of “identifying and eliminating any gaps in our investigative and regulatory frameworks”.
He said the agency would use its authority under the Commodity Exchange Act, and would provide leniency to firms and individuals who self-disclosed violations and co-operated.
Mr McDonald highlighted several examples of conduct the CFTC may investigate, including the payment of bribes to secure business trading swaps and derivatives contracts.
“Corrupt practices might be used to manipulate benchmarks that serve as the basis for related derivatives contracts,” he added. “Prices that are the product of corruption might be falsely reported to benchmarks. Or corrupt practices in any number of forms might alter the prices in commodity markets that drive US derivatives prices.”
Gregory Mocek, a former CFTC enforcement director and now partner at Allen & Overy, said the new initiative would be a “game changer” for international commodity trading firms.
“Now that bribery is in its sights, I suspect that the commission could deliver a hard blow to a number of players in the international commodity trading space,” he said.
Brian Benczkowski, chief of the criminal division at the justice department, said in a statement: “We look forward to working in parallel with the CFTC in cases involving foreign corrupt practices, as well as others”.
Get alerts on Commodities when a new story is published