It seemed to be a thumb in the eye of the U.S. Justice Department. Britain last week criminally charged a former Barclays employee suspected of trying to manipulate global interest rates, even though the authorities in London were aware that the employee had been assisting U.S. prosecutors in a related investigation for more than a year.
Some prosecutors in the United States were annoyed by the move, but it did not ignite another trans-Atlantic dispute over how to crack down on bad behavior by global banks with large operations in New York and London. Instead, the charges against the Barclays employee, Jonathan Mathew, reflected a tentative truce that has emerged between British and U.S. authorities, according to people briefed on the matter.
The Justice Department in Washington and the Serious Fraud Office in London, these people said, have agreed to divide up cases against employees at the center of an investigation into the manipulation of the global interest rate benchmark used for mortgages, credit cards and corporate loans known as the London interbank offered rate, or Libor. The agencies are splitting the caseload, which involves traders in both New York and London, depending on which jurisdiction will have an easier burden of proof or possesses stronger evidence against a particular bank employee.
The cooperation should enable prosecutors on both sides of the Atlantic — whose political mandates and personalities have at times clashed, stalling the investigation — to file several new criminal cases stemming from the more than 5-year-old inquiry.
The Justice Department, the people briefed on the matter said, is expected to charge a handful of other Wall Street employees during the next year as it continues to investigate banks, including Citigroup and Deutsche Bank.
The agreement over Libor could also provide a template for the Justice Department and Serious Fraud Office as they pursue other investigations into global banking giants.
The developments illustrate the fragile and ever-evolving relationship between Washington and London enforcement officials. Given the interconnected nature of the global financial markets, legal observers say, the agencies must maintain a level of cooperation.
Tensions peaked in late 2012, when Justice Department prosecutors notified the Serious Fraud Office that they were filing charges under seal against Tom Hayes, a former UBS and Citigroup employee seen as an architect of Libor manipulation. In turn, British authorities promptly arrested Hayes, setting off a series of fuming phone calls and angry letters on both sides of the Atlantic.