The holes in UBS’ controls

Despite internal reviews of its systems and an apparent thumbs-up from the FSA, the Swiss banking giant succumbed to a whopping rogue trading loss in its London office. How could this happen? Steven Francis and Imogen Hurst delve into the detail.

Steven Francis is a partner and Imogen Hurst an associate with law firm RPC (Reynolds Porter Chamberlain). Contact them at steven.francis@rpc.co.uk and imogen. hurst@rpc.co.uk.

At the end of November the FSA fined UBS £29.7 million as a result of rogue trader losses associated with the activities of Kweku Adoboli. In mid-September Adoboli was sentenced to seven years’ imprisonment following his conviction on two counts of fraud. The now notorious fact is that Adoboli, as a result of his unauthorised trading, lost UBS some $2.3 billion. How could this have been allowed to happen? At the very least, why were these illicit activities not identified earlier, before the losses reached such an astronomic scale?