Case Scenario: The Wall Street Journal Case in the News

Deutsche Bank Found Inappropriate Communication between Staffer, Central Bank Salesperson Was Placed on Leave in March
A top Deutsche Bank saleswoman was placed on leave last month after the German bank found what it regarded as inappropriate communication between her and Singapore's central bank, according to a person familiar with the matter, marking a significant new twist in the yearlong global investigation into the currency market. Kai Lew, a director of sales at Deutsche Bank in London tasked with handling central bank clients, was put on leave because the bank-the biggest currency dealer in the world- concluded that she had communicated improperly with the Monetary Authority of Singapore, or MAS, this person said. She is one of roughly 30 employees at nine banks who have been fired or suspended as part of a burgeoning global investigation into possible manipulation of currency markets, and the first in sales rather than trading. At the time her suspension was first reported, March 31, the reasons for the move were unclear. Lew couldn't be reached for comment.

The MAS said it "does not comment on its dealings with individual financial institutions." Deutsche Bank said it "has received requests for information from regulatory authorities that are investigating trading in the foreign exchange market. The bank is cooperating with those investigations, and will take disciplinary action with regards to individuals if merited." The allegation makes the MAS the second central bank to be drawn into the case. The Bank of England last month said it had suspended a staff member and hired an outside law firm to perform an independent investigation into its employees' conduct. The MAS itself is among a growing list of central banks and regulators that has said it is investigating potential manipulation of the foreign exchange markets. After finding Lew's communications with the MAS and deciding to put her on leave, Deutsche Bank executives called MAS officials to inform them of their findings, according to the person familiar with the matter. The exact nature of Lew's communication with the MAS isn't clear. Traders from other banks have been disciplined in recent months for a variety of allegedly improper communication, primarily with traders at rival banks. The communication has ranged from sharing market-sensitive information to lewd banter, according to people familiar with the banks' findings. Communication between bank employees and officials at central banks is common.

Central banks rely on real-time intelligence from the financial industry to understand what is happening in the markets. But with the global regulatory investigation into currency trading mushrooming and focusing in part on inappropriate sharing of information, some banks have started clamping down on that long-standing practice, industry officials say. "The amount of information they [central banks] are getting from us has collapsed," said a senior executive at a large global bank. By volume, central banks are typically small players in the currency market. The benchmark industry survey from the Bank for International Settlements last year noted that they contributed less than 1 percent of average daily trading volumes in April 2013. Still, some bankers say central banks can command a special place in the market because of their dual role as an authority and a client. "It starts with the fear factor," one banker said. "Are central banks even really clients? They regulate us as well as being clients. They can shut us down. They are special." Central banks buy and sell currencies for a range of reasons, including direct intervention to weaken or strengthen their currencies under their monetary policy mandate, or trades on behalf of national pension funds or other stores of sovereign wealth. Most also monitor the market in their home currency in a regulatory capacity simply to check that market conditions are orderly. This, bankers say, also muddies the usual relationship between a bank and its client. "We don't know if they are seeking to keep their currency steady or if they are rebalancing their official reserves," the banker said. "That puts traders and sales people in a potential conflict."

Questions for Discussion

1. Under what conditions is it acceptable for a company to monitor its employees' communications?

2. How would you feel if your employer monitored your communications?

3. Are there alternatives to keeping such a close eye on employees? If so, what?