In the wake of recent scandals to hit London’s financial services community, firms are being urged to improve surveillance and monitoring in a bid to comply with market abuse legislation.

Earlier this week, Barclays, Britain’s second biggest bank, was fined $451 million in the U.K. and U.S. after it admitted to manipulating the London interbank lending rate (Libor) from 2005-2009 to the benefit of its derivative positions, as well as by a desire to make the bank look stronger during the financial crisis. The Financial Services Authority, the U.K. regulator, has said that Barclays, whose chief executive Bob Diamond has now resigned with immediate effect because of the furore, was not alone in providing false Libor submissions. The Royal Bank of Scotland has sacked four traders over their alleged involvement in the Libor-fixing controversy.

“The Libor scandal has caused a huge blow to the reputation of the banking industry,” said Adair Turner, chairman of the FSA. “The cynical greed of traders asking their colleagues to falsify their Libor submissions so that they could make bigger profits—has justifiably shocked and angered people.”

Market abuse has become a hot topic in the past few months, with the FSA demonstrating its commitment on the matter. The City watchdog is preparing to launch spot checks on the reporting of suspicious trades by firms, in a bid to improve market monitoring.

“The public’s perception of the entire industry is quite low at the moment and firms should be vigilant against people breaking the rules in light of not just the Libor thing, but everything that has happened over the past few years,” Stephen Piron, director of BrightSun Group, which builds data visualization tools for hedge funds and investment banks, told Markets Media. “There are a lot of tools out there that you can use to catch these things—you just need to be resourceful.”

The U.K. government, meanwhile, has ordered an immediate independent review into the future operation of Libor, a notional rate set by a 16-bank panel which serves as a fundamental benchmark to around £350 trillion of financial contracts around the world, as well as a parliamentary inquiry into the wider banking sector. The Serious Fraud Office, an independent U.K. government department, is also considering whether to bring criminal charges over the Libor scandal.

While in Europe, the pan-European regulator, the European Securities and Markets Authority, is looking to impose strict new market abuse rules with big fines and a damaged reputation on the cards for any firm who falls foul of the new regulations.

“There is no doubt that this [Libor scandal] is market manipulation of the worst kind,” said Arlene McCarthy, a left-of-center U.K. MEP who is vice-chair of the European parliament’s influential Economics and Monetary Affairs Committee.

“Fines have proved ineffective and have not changed the greedy culture in the banking industry. The penalties for this rogue behavior must be a custodial sentence.

“The U.S. has the power to take criminal prosecutions and we too must toughen up European Union-wide market abuse rules to make this immoral behavior a criminal offense.”

But, for firms, having the programs in place to spot potential market abuse could be critical in avoiding a brush with the regulators or even the law. And those that are already doing this monitoring and surveillance could possibly even gain a competitive advantage as it shows that they are conducting their business in a fairer manner.

“With the current political climate, regulators are flexing their muscles when they catch people or entities abusing the market, and for firms that do not have any protection against this, the damages are severe,” Matthew Coupe, sales director of Redkite Financial Markets, a provider of real-time market surveillance systems, told Markets Media

“The key thing that should be at the front of all firms’ minds is that the compliance and risk department should not be viewed as just a cost centre that needs to be there, but enables the business to against protect revenue slippage and protects the brand of the firm.”