In a short statement on its website, the Government department responsible for investigating and prosecuting serious and complex fraud said that three British nationals had been arrested at homes in Surrey and Essex. The three men, aged 33, 41 and 47, were then taken to a London police station for interview.

The SFO confirmed in July that it was investigating "a number of financial institutions" in the UK over alleged manipulation of the rate, following Barclays Bank's announcement that it had settled with regulators in the UK and US over "misconduct" in relation to LIBOR submissions. It is proceeding under existing fraud and false accounting laws, as there is not yet a specific criminal offence in relation to LIBOR.

LIBOR is a daily reference rate based on the interest rates at which banks can borrow unsecured funds from other banks. It is widely used internationally as the pricing basis for some $550 trillion worth of financial instruments including interest rates and currency hedging instruments, and to set the interest rate for syndicated loans.

In his independent review of LIBOR, commissioned by the Government in July, Martin Wheatley of the Financial Services Authority (FSA) recommended that administering and contributing to LIBOR should become regulated activities, while criminal sanctions should be introduced for "misleading statements" in relation to the benchmark. The Government later accepted Wheatley's recommendations in full.

The Financial Services Bill, which is currently before Parliament, is to be amended to bring LIBOR-related activities within the scope of statutory regulation. This will allow the FSA and future regulators to take direct action against firms for misconduct, including financial penalties and banning firms from carrying out other regulated activities. The Bill will also create a new criminal offence of making misleading statements in relation to benchmarks such as LIBOR, as well as amending the language of existing offences.

LIBOR will be the only benchmark regulated under the initial set of rules. However, the Government has indicated that the regulatory framework could be used to criminalise the manipulation of other benchmarks if appropriate at a later date, such as those relating to the energy or commodities markets.