UBS fined £8m after employees traded with customers' money
FSA imposes its biggest-ever penalty and attacks bank's 'inadequate systems and controls'
- guardian.co.uk, Thursday 5 November 2009 13.10 GMT
- Article history
Swiss bank UBS has been slapped with an £8m fine, the third-largest ever levied by the City regulator, after it was discovered that four of the bank's employees were able to use customer money to trade in currencies and metals markets.
As a result of the trading activity, the bank has been forced to pay compensation of more than $42m (£25.2m) although the FSA established that it had not itself profited from the trading.
The fine would have been £10m if UBS had not agreed to settle with the regulator at an early stage. Margaret Cole, FSA director of enforcement and financial crime, said the fine was set at a high level as a deterrent to others: "The penalty, one of the largest fines we have levied, reflects our tougher enforcement stance and our policy of imposing steep penalties to achieve credible deterrence."
At one stage as many as 50 unauthorised transactions a day were taking place in foreign exchange and precious metals by four employees who were using customers' money without authorisation and allocating losses to customer accounts. The events took place between January 2006 and December 2007 and were only uncovered by an internal whistleblower.
The FSA did not name the employees involved, but said that as a result of the concerns raised by employees, the bank had discovered that employees on one desk in the international wealth management business had been involved in the activity.
The FSA's final notice only refers to "Desk Head 'A'" and certain other employees on "Desk X" as being responsible. It is understood they no longer work at UBS.
Cole said: "These employees were able to take advantage of UBS's inadequate systems and controls, giving them free rein to make unauthorised trades with customer money that they were then able to conceal".
"It is imperative, particularly in these more challenging financial conditions, that firms have suitable systems and controls in place to keep their houses in order. Where firms fall short in this regard, the consequences will be severe."
The FSA concluded that UBS had failed to manage and control key risks, failed to respond to warning signs that the internal controls were inadequate and failed to provide an appropriate level of supervision over customer-facing employees.
The bank said: "UBS deeply regrets this incident and, having fully co-operated with the FSA's investigation, we are now pleased that this matter has been settled so we can move forward. This sanction arises from control failings within our UK international wealth management business, dating back to 2007, as identified in the FSA's Final Notice and in respect of which UBS has already taken full remedial steps".
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