Korea’s antitrust watchdog has launched an investigation into foreign banks on speculation over collusions on foreign exchange swap bids, sources said Thursday.

The Fair Trade Commission raided offices of a dozen foreign lenders, including Standard Chartered Cheil Bank Korea and Citibank Korea, and asked them to submit documentation related to bidding processes for foreign currency swap transactions in order to look into whether unfair business practices were involved.

“If the investigation finds any collusion in the processes, the authorities will levy fines and issue corrective orders,” said Jeon Choong-soo, head of International Cartel Unit at the Fair Trade Commission, adding that not all foreign banks operating in Korea are subjected to the probe.

This is a follow-up investigation by the watchdog after its first-ever penalty for an FX derivatives-related case, with regulators around the world stepping up efforts to crack down on market manipulation.

In March, the antitrust watchdog slapped a combined 59 million won ($49,600) in fines on the Seoul branch of Deutsche Bank and HSBC for rigging four bidding processes between 2011 and 2012.

The two firms agreed to avoid price competition and win bids alternately in the bidding process via online messengers for a Korean company’s foreign exchange swap trades.

The FTC had reportedly secured evidence of possible collusion among other foreign banks in question during a previous probe in which the FTC had asked them to provide their online chat data.

Citibank and SC confirmed they were under investigation.

“We are preparing relevant data to hand in to the FTC,” said an official at Citibank Korea.

SC Cheil Bank spokesman Chung Han-young said the bank is included as a subject of the investigation but declined to comment further.

Foreign currency swap is a kind of FX derivative that simultaneously trades the same amount of one currency for another with two different value dates. It is used by financial institutions and investors to hedge against their foreign exchange positions.

By Park Han-na (hnpark@heraldcorp.com)