The Financial Services Authority (FSA) has fined UBS GBP8m 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 took place between January 2006 and December 2007 at UBS’ London-based wealth management business.
FSA said that 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 operation’s peak.
According to FSA investigation, 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 to provide an appropriate level of supervision over customer-facing employees.
Margaret Cole, director of enforcement and financial crime at FSA, said: “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.”
UBS agreed to settle at an early stage of the FSA’s investigation meaning it qualified for a 20% discount. Without the discount, the FSA would have imposed a financial penalty of GBP10m. UBS has since paid compensation in excess of $42m by way of redress for its customers’ losses.
