FSA slapped £8 million fine on UBS for unauthorized trading losses

 The Financial Services Authority fined UBS £8 million - its third-largest fine ever - for failing to prevent employees from posting unauthorized trading losses to customer accounts.

FSA alleges that says systems and controls failures at the Swiss bank enabled four employees to carry out unauthorized transactions involving customer money on at least 39 accounts. This activity took place at UBS' London-based wealth management business since January 2006 till December 2007. Only when complainant raised concerns internally, it came to light. The further investigation showed that UBS employees had taken part in the trading of foreign exchange and precious metals using customer money without authorization and allocated losses to customers' accounts. About 50 transactions a day were taking place at the operation's peak, according to the internal UBS investigation. 

"These employees were able to take advantage of UBS' inadequate systems and controls, giving them free rein to make unauthorized trades with customer money that they were then able to conceal,” says Margaret Cole, FSA director of enforcement and financial crime. "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. The Swiss bank has since paid out $42 million in compensation to customers hit by the scam.