UBS fined £8 million by UK watchdog for trading with client money
06 Nov 2009
Britain's financial watchdog yesterday slapped a hefty £8 million ($13.3 million) fine on Swiss bank UBS after it was revealed that four employees at the bank's international wealth-management unit in London had gambled on customers' money to speculate in the foreign exchange and commodities markets.
Earlier in the year, UBS, Switzerland's biggest bank, whose reputation has been severely dented since the onset of the global financial meltdown, had to be bailed out by the Swiss government after amassing more than $50 billion in writedowns and losses from the credit crisis, was forced to pay record fines in the US for a series of frauds and facilitating tax evasion for its wealthy American customers.
UK's financial watchdog, The Financial Services Authority (FSA) imposed the heavy fine on UBS after an investigation revealed that a desk head and three other employees in the international wealth management business had been placing up to 50 unauthorised trades a day on at least 39 customer accounts without their permission in 2006 and 2007.
The unauthorised activity only came to light when a whistleblower raised concerns internally.
Upon further investigation, it was discovered that 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 peak of the illegal operations by the employees.
The 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, implement effective remedial measures in response to several warning signs that suggested the business' systems and controls were inadequate and provide an appropriate level of supervision over customer-facing employees.
