UBS: Our Risk Systems Did Detect $2bn Rogue Trader

A few weeks ago, UBS employee Kweku Adoboli (universally described as a "rogue trader") ran up a $2 billion loss for his employer; many readers wondered how it is the systems which allow trades to happen at all aren't better tuned to catch such massive cash flows without triggering alerts. Now, reader DMandPenfold submits a report from Computerworld UK in which the bank claims that such triggers were in place — they were simply not acted on. From the article: "UBS has insisted its IT systems did detect unusual and unauthorised trading activity, Interim chief executive Sergio Ermotti, who is running the company following Oswald Grubel's resignation last month, sent a memo to employees saying the bank is aware that its systems did detect the rogue activity. In the memo, Ermotti wrote: 'Our internal investigation indicates that risk and operational systems did detect unauthorised or unexplained activity but this was not sufficiently investigated nor was appropriate action taken to ensure existing controls were enforced.'"

Comments

Called it

[CharlyFoxtrot]

From my comment on the original article :

"Let's face out out on the terrain no-one is holding these guys accountable. IT may set up the system, Risk Management may generate the reports and they'll be either modified to say what management wants to say or just plain ignored because like all gamblers these guys think they have a system which lets them keep on winning even as they are betting their house (or in this case our houses.)"

This "blame IT" crap has gone on long enough. It's time we stood up for ourselves instead of allowing ourselves to be used as a convenient scapegoat all the time.

Not a rogue trader

[steamraven]

If they detected it, and didn't do anything about it, doesn't that mean they approved of it?

Re:What was the security protocol?

[Anne Thwacks]

The entire derivativves trading system is a giant Ponzi scheme - the value of fees charged by bankers for trading in derivatives based on on changes in the value of a security exceeds the value of the underlying security over a relatively short time. (it is MINUTES for gold!)

Someone then "looses" a great deal of money. In reality, the "missing" money has already been paid out in commissions to banks for trading - and "bonuses" for traders. (Anyone who understands differential equations can see that vastly more money is paid out to bankers than is actually invested in stocks and bonds, and the banks are sucking the life blood from the world's economic system).

You might ask "Why do people invest in such an obvious Ponzi scheme?" The answer is "Institutional investors do not care about the long term, and are quite happy to feed the system, so long as they get a percentage, and a "plausible deniability" get out clause when it goes wrong. (Why did people give all their money to someone who "Madoff" with it?

Why did the bank not stop him? Because prior to catastophic disaster, he seemed to be "on a roll", and was winning more than he was losing. Banks do not employ people who understand differential equations in a management role, and most bank directors have only a marginal grip on reality. They say "ooh, profit!" like Homer Simpson and doughnuts.