With so many scandals in the financial industry, it’s hard to keep up with who's getting fined for doing what illegal and nefarious activity. Here’s a rundown of the critical information you may have missed about the latest -- and possibly largest -- scandal: foreign exchange manipulation.

Source: Wikimedia Commons.

1. It's bigger than Libor
The first and most important thing you need to understand as an investor is the sheer magnitude of this scandal. Forex is a $5.3 trillion per day market, and unlike the situation with Libor, there are bank customers who could have suffered losses from any proven cases of collusion or manipulation. That means that, in addition to fines, banks could be facing lawsuits and antitrust penalties. In Europe, those penalties amount to 10% of revenue, and they can be higher in the U.S.

According to the Financial Times, there are 15 banks involved in the scandal. The five biggest players in forex -- Barclays (NYSE:BCS), Deutsche Bank (NYSE:DB), UBS (NYSE:UBS), Royal Bank of Scotland (NYSE:NWG), and HSBC (NYSE:HSBC) -- are expected to need an additional €8.5 billion and €10.6 billion for litigation expenses in the next two years. This is on top of "the €16.4 billion those five banks have already provisioned for legal costs through the end of 2013."

2. Besides fines, there are other major costs
The investigation into forex manipulation is a global effort, with "unprecedented global co-operation," according to Matthew Nunam of the UK's Financial Conduct Authority. Regulators are, as one would expect, dedicating an immense amount of personnel to the task, but they have also required banks to do much of the legwork in these investigations. In addition to the loss of top trading personnel, the costs are not insignificant.

The Financial Times reports that more than 500 people from the top 10 banks in forex are working on internal investigations, and some estimate that total manpower is totaling over 1,000. In addition to lawyers and other specialists, the costs are estimated to be in the hundreds of millions of dollars, and considering the sheer amount of data from trading activity and communications between traders, this is not surprising. Some estimate that these investigations could last several more years, adding to the cost.

Another cost comes from suspensions. While only 25 traders have been implicated so far, banks are finding it very difficult to replace them; outside hires might also be swept up in the scandal, and internal promotions might put someone too junior into the vacated roles. One headhunter quoted by Reuters also noted that the number of suspensions also complicates matters, as it's difficult to hire someone unless you know whether the other person is coming back or not.

3. It might not be the last 
Barclays, Deutsche Bank, UBS, Royal Bank of Scotland, and HSBC were also implicated in the Libor scandal, and three of them (Barclays, Deutsche Bank, and HSBC) are on the committee that sets the London Gold Fix, which is also under investigation. The potential additional costs these banks are facing are not immaterial, and investigators are looking into other benchmarks as well.

Considering the number of scandals we've seen recently, I would not be surprised to hear that other rates and benchmarks are suspected of manipulation. Again, this just adds cost on top of cost. It makes you wonder if the "additional" revenue from trading activity is really worth it in the end. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.