Rogue Trader Brought Down By Investigative Accounting

The recent jailing of former UBS trader Kweku Adoboli for what the police describe as the UK’s biggest ever fraud, is in part due to the internal investigation launched in the summer of 2011 and headed by a forensic accountant.

The accountant began his investigations but had his work cut out, as, having started in the back room, Adoboli had become adept mastering the bank’s processes and at entering false information into UBS’s computer systems to conceal the enormous risks he was taking.

In many cases he extended the time in which some trades would complete to buy to give him the time to make up any losses and then failed to insure or “hedge” these transactions, which is a ploy to maximize profits, thus exposing the bank to greater risks.

He also set up what he called his “umbrella” fund, which was a slush fund he could use to hide any profits on his unauthorised trades. Having started on £30,000 a year, by 2011 Adoboli was a director and earning a combined salary and bonus of £360,000.

However, the bank became suspicious and got a forensic accountant to investigate. It was his probing that eventually culminated in Adoboli sending him an email in September last year that apparently confessed to booking false trades.

Making the decision to start an internal investigative accounting probe can have benefits, and, in the case of UBS, starting the investigation sooner might have prevented the massive losses and the subsequent resignations of its Chief Executive Oswald Gruebel and the co-heads of global equities Francos Gouws and Yassine Bouhara.

Author: Roger Isaacs, 26th November 2012

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