UBS fined $47.6 mil­lion over Adoboli scan­dal: reg­u­la­tor

The Pak Banker - - Front Page -


Bri­tain’s fi­nan­cial reg­u­la­tor said Mon­day it had fined Swiss bank $47.6 mil­lion for fail­ings that al­lowed Kweku Adoboli to com­mit the coun­try’s big­gest fraud.

Adoboli, 32, was jailed last week for seven years af­ter gam­bling away $2.3 bil­lion (1.8 bil­lion eu­ros) of the lender’s money. “The FSA has fined UBS AG #29.7 mil­lion for sys­tems and con­trols fail­ings that al­lowed an em­ployee to cause sub­stan­tial losses to­talling $2.3 bil­lion as a re­sult of unau­tho­rised trad­ing,” the watch­dog said in a state­ment.

It added: “The sys­tems and con­trols fail­ings re­vealed se­ri­ous weak­nesses in the firm’s pro­ce­dures, man­age­ment sys­tems and in­ter­nal con­trols.” Last Tues­day, a jury in Lon­don found the Ghana­ian-born banker guilty of two counts of fraud, though it cleared him of four charges of false ac­count­ing. UBS be­came aware in Septem­ber 2011 that unau­tho­rised trades had taken place on the Swiss bank’s Ex­change Traded Funds Desk on its Global Syn­thetic Eq­ui­ties (GSE) di­vi­sion in Lon­don. “UBS’s sys­tems and con­trols were se­ri­ously de­fec­tive,” said Tracey McDermott, di­rec­tor of en­force­ment and fi­nan­cial crime at Bri­tain’s Fi­nan­cial Ser­vices Author­ity ( FSA) watch­dog, in a state­ment.

“UBS failed to ques­tion the in­creas­ing rev­enue of the desk and failed to en­sure that there was a cor­re­spond­ing in­crease in the con­trols in place over the desk. “As a re­sult Adoboli, a rel­a­tively ju­nior trader, was al­lowed to take vast and risky mar­ket po­si­tions, and UBS failed to man­age the risks around that prop­erly. “We know from past ex­pe­ri­ence that fail­ures to man­age risk prop­erly can cause firms to fail and cause sys­temic harm.” The FSA, which car­ried out a probe with the Swiss Fi­nan­cial Mar­ket Su­per­vi­sory Author­ity ( Finma), said in Mon­day’s state­ment it un­cov­ered sev­eral “par­tic­u­larly se­ri­ous” fail­ings.

The reg­u­la­tors said that the com­put­erised sys­tem op­er­ated by UBS to as­sist in risk man­age­ment was not ef­fec­tive, while its trade cap­ture and pro­cess­ing sys­tem had “sig­nif­i­cant de­fi­cien­cies”.”Mar­ket con­fi­dence was put at risk, given the sud­den an­nounce­ment to the mar­ket and size of the losses an­nounced,” the FSA state­ment added. UBS qual­i­fied for a 30per­cent dis­count in the fine af­ter agree­ing to set­tle early. The bank would have oth­er­wise faced a to­tal fine of #42.4 mil­lion from the FSA. Dur­ing the two-month trial, Adoboli ad­mit­ted los­ing the enor­mous sums but de­nied any wrong­do­ing. He claimed that se­nior UBS man­agers were fully aware of his ac­tiv­i­ties and en­cour­aged him to take risks and raise prof­its.

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