UBS fraud likely to reveal management failures, again

The recent rogue-trading scandal at UBS has again raised doubts about managerial competence and the efficacy of supervisory systems at investment banks.

Bonus-hungry traders operating in an environment where taking risk is encouraged and where there is enormous, competitive pressure between individuals and divisions to make profits, can too easily defeat restrictions if they have a mind to do so.

“These types of frauds are likely to continue to happen,” said Richard Abbey, senior managing director of financial investigations at Kroll, a leading global consultancy firm. “It is impossible to guarantee that someone committed to finding a way to breach systems and controls won’t find a way...