When the story of Kweku Adoboli, UBS's "rogue trader" who incurred 2.3 billion in losses for the Swiss bank, broke this weekend, my reaction probably mirrored that of many: "Really?  Haven't we heard this story before?"  For all demonization of SOX's Section 404, haven't most companies put some internal controls in place to prevent this?  And if the Achilles' heel of generals and regulators alike is that they always fight the last war, well Societe Generale handed banks a modern rogue trader's battle plan: start in the back office, learn the risk controls, then move to the front office and evade them. 

Here's Forbes' Francine McKenna:

Kerviel and Adoboli were both veterans of the back office. That gave them, according to their accusers, an advantage over most traders.  They actually understood and could appreciate the purpose of risk management and control mechanisms that were supposed to be in place. They weren’t the kind of traders who are deaf, dumb, blind, and angrily resistant to checks and balances, reports and circuit breakers, and requests for information and explanations.

They were smarter.  They knew how to bypass the controls.

I think a ban on moving smarter, more aware back office and middle office professionals onto the trading floor is an insult to traders.  And wrongheaded.  What was missing in both cases is supervision and enforcement of controls.

Financial Institutions, White Collar Crime | Bookmark

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