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Rogue trader


One of the problems associated with the inability to run employee’s background check is that the organization can miss out on employee irregularities for instance rogue trading.

Rogue trader

Rogue trader is an employee who works independently of other employees. They usually tend to form this behavior after they are given a high reputation job where they are unable to perform duties well and thus lose huge amount of money of the company. After losing the amount they tend to hide it and try to earn it back by investing in highly risk investments which prove even fatal for the company and takes the companies to bankruptcy or millions in debts.

Over the years there have been many high-profile cases, usually in the banking industry, where a rogue trader has, through exploitation of company’s loopholes, trust of the employer and no suspicion, caused an employer to lose very large amounts of money.

Case study:

An employee of Société Générale bank, Jérôme Kerviel is known to have caused the bank a loss of $7 billion. In 2006 Kerviel earned a bonus of €60,000 on top of a €74,000 salary due to his modesty in terms of the salaries paid to traders in the market. But what the Bank officials didn’t knew was that throughout 2007, Kerviel had been trading profitably in anticipation of falling market prices; however, he was accused of using his powers to make unauthorized trades totaling as much as €49.9 billion, a figure far higher than the bank's total market capitalization. Bank officials claim that for his personal gains he lost the huge amount of money. Kerviel generated €1.4 billion in hidden profits at the beginning of 2008. His employers say they uncovered unauthorized trading traced to Kerviel on 19 January 2008. The bank then officially closed hiss accounts on 21 January 2008 but the market experienced huge drop in equity indices and losses attributed are estimated at €4.9 billion ($7 billion). Family members of Kerviel says that he was used as a scapegoat by bank officials for the excuse of heavy losses company bared recently.

Lessons learned:

• Employee’s should always be screened from time to time to avoid liabilities.

• Hiring of incompetent person for the job, either internal hiring or external, can cause company to lose not only money but also reputation.

- What did they do?

Rogue traders, though, are only labeled as such if they lose. If their trades are enormously profitable, no one calls them "rogue." They are more likely to receive a huge bonus. Which means they are generally bad hiring or incompetent people who lose a lot of money of the company. Another example of rogue trader was Nick Lesson. He was appointed as General manager of new operations in future markets on the Singapore International Monetary Exchange (SIMEX). Although Leeson was denied broker’s license in United Kingdom because of fraud on his application. He was still given a responsible post by the management. At one point, Leeson had 20,000 future contracts worth more than $3 billion on the Nikkei. He kept making losses which he hid from the company on a fake account which was directly linked by another account in Singapore owned by the company. He kept investing in high risk investments to earn back the losses. But he lost a large chunk of the investments due to a downturn in the Nikkei after a major earthquake in Japan. Total loss to the 233 years old Barings Bank was well over $1 billion and eventually led to its bankruptcy. Leeson was charged with fraud and served several years in a Singapore prison.

How can we help?

Our employee RISC assessment will not only help an organization during selection of the organization fit candidate, but it can also help after selection through time to time screening which will prove beneficial while making decisions like promotions as well as will keep the employees on their full potential.

Our Employee RISC Assessment program is compliant with the prevalent laws of Fair Credit Reporting Act (USA), Global Data Protection Regulations (EU) and Information Security Management System standards given by ISO in ISMS 27001:2013. This means that your data security is our priority. Being a member of National Association of Professional Background Screeners (USA) and Association of Certified Fraud Examiners (ACFE) our investigators, around the globe are the experts and they receive trainings to keep them up to date about the different advancements in the field as well as solutions to industry specific problems. De RISC group is present even in the remotest areas around the globe to provide our customers with the remotest reach of research and analysis.