Traders at some of the world's largest banks have been caught — yet again — manipulating markets for their own benefit. This time, foreign exchange traders rigged currency markets. And again, banks' internal compliance mechanisms proved unable to forestall illegal behavior and market regulators were playing catch up. Substantial fines have been leveled, but they are unlikely to prove much of a deterrent against future misdeeds. More intense scrutiny and tighter regulations are equally improbable. Bankers will maintain their culture of impunity and continue to indulge in behavior that has already plunged the world into one global recession.

More than $5 trillion is traded each day on the global foreign exchange market. Forty percent of the action takes place in London. Those transactions are the lubricant of global trade and finance, facilitating the exchange of goods, services and even serving as the benchmark rates for many financial investments bought by large investors such as pension funds. Yet despite the size of this market, regulation is light, with a few major banks dominating trading. This is an invitation to abuse and, not surprisingly, the invitation was accepted.

Rather than carrying out the arms-length, independent transactions that define free markets, traders manipulated exchange rates, colluding to fix rates during the 60 second window in which banks set their benchmark rates for the day. They did this by sharing information in online chat rooms, communicating preferred positions and setting rates accordingly. The result was rates that met traders' needs, and anyone who was not in that circle was at the mercy of their manipulations.