FSA hands UBS its third largest fine for employee fraud.

UBS AG (UBS) has become the latest organisation to be fined by the Financial Services Authority (FSA), which is cracking down on foul play by banks and their employees.

Swiss-based UBS has been fined £8 million, the third largest FSA-imposed fine on record, for “systems and controls failures”.

The FSA found that four employees carried out unauthorised transactions at UBS’ London-based wealth management business, involving customer money on at least 39 accounts between January 2006 and December 2007.

The fraud was only discovered when a whistleblower at the firm raised their concerns internally. Further investigation uncovered deceit involving foreign exchange and precious metal trading. The employees in question used 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 its peak.

Margaret Cole, FSA Director of Enforcement and Financial Crime, said: “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’s imperative, particularly in these more challenging financial conditions, that firms have suitable systems and controls in place to keep their houses in order.”

Ms Cole warned that firms will face severe consequences where they fall short. 

Like Swinton (click here) before it, UBS agreed to settle early in order to receive a discount on its fine. Had it not, the fine would have been around £10m.