by Leo King

UBS fined £8m over data failures

Nov 05, 2009
Financial Services IndustryIT LeadershipIT Strategy

The Financial Services Authorityhas issued an £8 million fine to UBS, after system and control failures at the bank enabled employees to make unauthorised trades using customer money.

The unauthorised transactions, from the UBS London-based wealth management division, used money from 38 customer accounts. They took place in 2006 and 2007, and only came to light after a whistleblower at the bank raised concerns.

UBS, which is shedding 8,700 jobs globally during the recession, has paid over $42 million (£25.3 million) in compensation to customers affected by the problems. As many as 50 unauthorised transactions a day were being executed, it found in an internal investigation, usually involving foreign exchange products and precious metals.

The FSA said UBS had “failed to manage and control the key risks” associated with its wealth management business model. In spite of several warning signs that the bank’s systems and controls were inadequate, it did not implement “effective remedial measures”.

The regulator also criticised UBS for failing to properly supervise its customer-facing staff.

Margaret Cole, FSA director of enforcement and financial crime, said the penalty was “one of the largest fines we have levied”, warning other banks they faced “severe” consequences if they made similar failures.

“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,” she said.

In a separate incident two months ago, Barclays Capital was fined £2.45 million by the FSA for inaccurately reporting nearly 60 million transactions as a result of “serious weaknesses” in its data feeds.