UBS hit with £8m unauthorised trading fine

Swiss banking giant UBS has been slapped with an £8 million fine for failing to stop four employees carrying out unauthorised transactions involving customer money.

At least 39 accounts were affected by the unauthorised trading of foreign exchange and precious metals between January 2006 and December 2007 at UBS' London-based wealth management business.

The losses were then allocated to customers' accounts, the Financial Services Authority said.

An internal UBS investigation estimated that as many as 50 unauthorised transactions a day were taking place at the operation's peak.

The FSA said that UBS had failed to manage and control the key risks, and the level of risk, created by its international wealth management business model.

It had also failed to address 'several warning signs' that suggested the business' systems and controls were inadequate. 

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 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.'

The £8 million fine is the third largest imposed by the City watchdog.

UBS agreed to settle at an early stage of the FSA's investigation meaning it qualified for a 20% discount.  Without the discount, it would have faced a fine of £10 million.

The bank has since paid compensation in excess of $42 million for its customers' losses.