Banks urged to tighten FX controls
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NAB's Cicutto said four of its traders exploited internal weaknesses.
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LONDON (Reuters) -- The umbrella body of the $1.2 trillion a day foreign exchange market has urged banks to tighten internal controls to prevent currency fraud and malpractice.
The call from the Financial Market Association (ACI) comes after two recent scandals which have seen 47 people in the United States charged with offences and four traders at Australia's biggest bank suspended from their jobs.
"Ultimate responsibility for misdemeanors must rest with senior management. It is their duty to ensure that the systems and controls in place within their organizations are robust enough to swiftly identify erroneous trades or employee wrongdoing," the ACI said in a statement Tuesday.
In November, U.S. federal authorities charged 47 people with running a currency scam to defraud investors and big Wall Street firms. That came only 18 months after a currency scandal involving a rogue trader at the U.S. unit of Allied Irish Bank.
Then earlier this month, National Australia Bank suspended four traders after it uncovered unauthorized currency options trades.
The bank said it found gaps in its internal procedures that had allowed the traders to breach trading limits, leading to losses of A$360 million ($277 million). (Full story)
NAB's Chief Executive Frank Cicutto said last week that the options traders exploited weaknesses in its internal procedures and that it has identified and eliminated those weaknesses.
The ACI, which has around 19,000 members worldwide, promotes an international model code of conduct and practice for one of the world's least regulated markets.
Its Committee for Professionalism (CFP) formulates and proposes guidelines, both technical and ethical, on market operations and the professional activities of its members.
"(The CFP) would stress that it is rare for frauds or misdemeanors to be perpetrated through highly complex trading scams or processes, or through the actions of criminal masterminds," it said.
"More usually it is through a simple exploitation of lax controls throughout the transaction flow process, such as poor confirmation details checking or poor oversight and challenge by a firm's senior management."
Industry experts and academics say an effective way to regulate this global, 24-hour market would be to establish a worldwide watchdog but such a structure would be costly and probably too complex to implement.
The ACI has said national regulators needed to cooperate more and recognize a set of global standards for the foreign exchange industry to help prevent scams.
Copyright 2004
Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
