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FSA fines UBS £8m

The FSA has fined UBS £8m for systems and controls failures that enabled four employees to carry out unauthorised transactions involving customer money on at least 39 accounts.

The unauthorised activity, which took place between January 2006 and December 2007 at UBS’ London-based wealth management business, came to light when a whistleblower raised concerns internally.

UBS employees had taken part in the trading of foreign exchange and precious metals using customer money without authorisation and allocated losses to customers’ accounts.  

An internal UBS investigation estimated that as many as 50 unauthorised transactions a day were taking place at the operation’s peak.

An FSA investigation found that UBS had failed to manage and control the key risks and the level of risk created by its international wealth management business model.

It also failed to implement effective remedial measures in response to warning signs that suggested the business’ systems and controls were inadequate and did not provide an appropriate level of supervision over customer-facing employees.

UBS agreed to settle at an early stage of the FSA’s investigation meaning it qualified for a 20 per cent discount, without which it would have faced a penalty of £10m. It is the third largest fine the FSA has ever imposed. 

UBS has since paid compensation in excess of £25m to affected customers.

FSA director of enforcement and financial crime Margaret Cole says: “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.

“These employees were able to take advantage of UBS’ 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.”

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Comments

There are 12 comments at the moment, we would love to hear your opinion too.

  1. Where does all the ‘fine’ monies go and are the FSA Accounts being monitored.

    Is it to pay large salaries and bonuses?

    Cynical or not?

  2. Why are you so cynical Anonymous of 12.19?

    Surely the money goes towards keeping your bills so low 🙂

  3. Tsk, Tsk, these ‘wealth managers’, what can you do with them eh?

  4. What actions are being taken against the employees? I’m sure that just about every company in the land could be used for some sort of scam if the employees were clever enough and suitably criminally minded.

  5. I thought the FSA were government owned so there is your answer!

  6. I wonder how many of the unauthorised transactions resulted in a profit? Are the clients paying back profits they made too on the transactions they didn’t sign the form for?

    Given that the trading staff are paid on profits they make, not losses, they would hardly be making unauthorised loss-making trades just for kicks.

    You notice the FSA is the first to jump in there with a comment on how well they have done.

  7. The fines go to reduce the monitoring fees the following year so UBS have done everyone (except their customers) a favour

  8. This is great stratagey from the FSA fooling every body that they have been incompetent so that bank think they can get away with it ,then they give them a huge fine!!!!

    Brilliant

  9. If the fines go to reducing the monitoring fees, these should be all free with the number and amount of fines so far this year.

  10. Interesting that the judgement is dated August and that each page is headed up “Without prejudice” when other judgements are dated around the time they are issued and do not have “Without prejudice” on each page.

  11. We all tend to forget that, in the end, these ever greater fines will only come out of the customers pockets.

    It is just a form of indirect taxation.

  12. Judgement on FSA site now corrected and no longer says “Without prejudice”, Wonder if anyone has had to pay for that slip up

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