Top all time bank frauds

Category: Financial Services,  News Source: The Economic Times,  Updated-On: Sep 20 2011



The UBS rogue trader was no different. Here's a list of top all-time bank frauds that proves no bank(fraud)ster, including the UBS rogue trader, works in a vacuum. His story like several others is hot material for another bestseller and, perhaps, a Hollywood blockbuster 

Iam sure it didn't happen in a day. The guy must have been either hiding old losses or propping up performance numbers," said a banker who has spent years in dealing rooms of MNC banks. Every deal cut in the trading room flows back to the back office for processing; only after that banks can settle with counterparties. Then, how do traders beat the system? Some create a secret dealing portfolio that is not mapped to the bank's risk assessment engine. It's easier for a rogue trader who has worked in the back office. 

He may team up with someone in the back office to mask the trades and open positions. Smart traders have their way around. If they keep a straight face and don't invite a surprise audit , the game can go on for days. Some take monumental risks: Think of a trader who picks up the phone or keys in trades, but don't put the deals in the bank's book. If the bets backfire , he will be caught in no time. T 

he counterparty will ask the bank for money. If the bank says it knows nothing about the trades, it will fish out proofs. But markets behave, this too can go on for some time. Corners are cut when a large bank enters a country and tries to fit its global technology on the local platform. "In the process, certain controls are compromised ," said another banker. Only big losses make news. Traders often hide smaller losses. Particularly, those dealing in complex structured products that have no single valuation. 

The bid and offer price gap is wide enough for the trader to pick a convenient valuation that appears on the books. A trader dealing in exchange traded funds may not have access to currency market. "But he can jump the hurdle by trading through the account of a colleague who is authorised to trade in currencies," said the banker. Structured product desks have an advantage. Such exotic stuffs are often combinations of multiple currencies , interest rates or stocks; traders here have access to different asset classes. Big losses can happen with small amount money, thanks to the leverage. With $1 million, a trader can lose $50 million. One thing is clear: no bank is safe, and a trader who is willing to take big risks can beat any system. 


Frank William Abagnale, Jr 
$2.5million various banks. 
An American security agent who passed $2.5 million worth of forged checks across 26 countries over 5 years 

Roberto Calvi (Vatican's God Bankers) 
$1.3billion, Banco Ambrosiano 
An advisor to the Vatican, Calvi headed the Italian bank, which collapsed following bad loans made to dummy companies in Latin America 

Nicholas (Nik) Leeson 
£208million, Barings Bank 
Leeson is a former derivatives broker whose fraudulent, unauthorised speculative trading caused the collapse of Barings Bank, UK's oldest investment bank 

Toshihide Iguchi 
£1.1billion, Daiwa Bank 
Japan's Daiwa Bank suffered a US$1.1 billion loss from unauthorised bond trading by Toshihide Iguchi, one of its executives in the US 

John Rusnak 
$691million, Allfirst Bank 
Rusnak was a former currency trader at Allfirst bank in Baltimore. He hid $691 million worth bad bets that snowballed into a major bank fraud 

Wang Liming & Miao Ping 
$2.4million, China Construction Bank 
Wang Liming, a former accounting officer with the China Construction Bank in Henan, stole 20 million yuan from the bank using fraudulent papers. Ping was an accomplice 

Vince Facarra 
A$360million, National Australia Bank 
Foreign exchange options dealer at National Australia Bank Vince Ficarra, along with colleague David Bullen, defarauded NAB A$360 million by making false trades to safeguard bonuses and hide losses 

Internet Fraudsters 
$1.1million, Nordea Bank Fraud 
Internet fraudsters siphoned off $1.1m from account holders at Swedish bank Nordea by using a Trojan program from 250 accounts after obtaining login details 

Jerome Kerviel 
£4.9billion, Societe Generale 
Kerviel, a French trader's unauthorised use of bank Societe Generale's computers resulted in losses valued at £4.9 billion 

Shivraj Puri 
Rs 400 crore, Citibank, Gurgaon 
Funds of 20 high networth customers of Citibank's Gurgaon branch was allegedly siphoned off by Puri, a bank executive 

Kweku Adoboli 
$2 billion, UBS, Bank 
A trader with UBS's investment bank caused his bank a $2 billion loss from illegal trading in its London equities unit 
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