UBS fined pound 8mn over staff misusing client accounts

Swiss bank UBS has been fined eight million pounds in the UK after four of its senior employees were found misusing funds of customers, including two companies of the Anil Ambani group.

The penalty of close to Rs 50 crore imposed by the Financial Services Authority (FSA) comes at a time when Indian authorities are probing alleged violation of norms in use of funds held in the UBS accounts of Reliance Energy and Reliance Natural Resources Ltd (RNRL).

The penalty, imposed after the employees were found speculating in foreign currency and commodities with money illegally taken from customers’ accounts, was part of a larger probe into the past management of Indian private banking accounts at UBS, British daily Financial Times reported here.

However, there was no suggestion of any wrongdoing by Anil Ambani or his group companies, the report added.

While the Indian government was probing possible misuse of the bank accounts, the British financial market watchdog was investigating the conduct of some former UBS employees, the newspaper reported.

According to the report, the Enforcement Directorate was investigating if some “unspecified parties” violated foreign exchange transactions by misusing UBS accounts in London held by RNRL and Reliance Energy.

“The directorate is probing allegations that funds from overdrafts on the accounts were transferred through accounts of a group of diamond dealers based in India and Belgium to a Mauritius fund owned by UBS, from where they were invested in Indian stocks through offshore derivatives,” the report added.

The report also quoted the Anil Ambani group as saying that it had maintained the UBS London accounts “in full compliance with all applicable laws, rules and regulations.’

The FSA, in an order dated November 5, imposed the fine on UBS for “systems and controls failures that enabled four employees to carry out unauthorised transactions involving customer money on at least 39 accounts.”

The activity, which took place between January 2006 and December 2007 at UBS’ London-based wealth management business, was brought to light by a whistleblower.

The probe found that the employees had taken part in trading foreign exchange and precious metals using customers’ 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. UBS has since paid compensation in excess of $42 million. The FSA probe found that the misuse cost clients nearly 26 million pounds.

According to the report, the FSA was still examining the role of individuals involved in the case, which revolved around the India private banking desk led by Sachin Karpe, who has left the bank.