UBS fined £8m for unauthorised transactions and one director banned

Advisers in the London branch of UBS’s international wealth management business were able to carry out unauthorised trades in foreign exchange and precious metals using customer money for two years – between 1 January 2006 and 31 December 2007 – says the FSA. UBS launched an internal investigation after its MLRO received an employee report on 31 December 2007 about a proposed transfer from a customer account to the personal account of a Desk Head. The investigation discovered that the Desk Head and some of his team were able to allocate profits and losses on unauthorised trades to different customers by exploiting control weaknesses. UBS FX traders only needed an identifier to execute a transaction: full details of the account could be supplied up to 24 hours later. Completed FX trades could be cancelled and re-booked to different accounts. Consolidated trades at an ‘averaged’ price were used to disguise the underlying deals and customers. Losses were hidden by trading on the accounts of customers who used the UBS ‘retained mail’ facility, which marked them as not in timely receipt of statements. More audaciously, advisers persuaded clients with sizeable liquid funds to “lend” sums to other customers who had lost money on the unauthorised trading. The “loans” were recorded as “UBS Guarantee Letters” on UBS headed paper although the firm had never agreed to underwrite them. A number of internal transfers went through a ‘suspense’ account, which hid the true source on customer statements.