Hong Kong’s Securities and Futures Commission (SFC) has fined the Royal Bank of Scotland HK$6 million for internal control failures, having failed to detect or prevent unauthorised trading activities in its Hong Kong emerging markets rates business.
The episode in question relates to unauthorised trading by RBS trader Shirlina Tsang in 2011, whose three year unauthorised trading and mis-marking of positions, including booking, cancelling and amending fictitious bonds and futures trades caused losses to the firm amounting to £24.4 million. In August 2013, she was convicted of one count of fraud and sentenced to four years and two months’ imprisonment.
The SFC said that RBS’s risk management and controls over its emerging markets rates desk were ‘deficient and failed to prevent misconduct’.
The SFC cited inadequate and ineffective front office supervision, an absence of controls over the process for independent price verification to mitigate the risk of inaccurate marking by traders of their positions, a weak reconciliation process which she exploited to conceal her unauthorized trading, a failure to have anyone covering her job when she took holidays and a computer system that permitted her entry while she was on those holidays and failed to monitor those occasions.
Mark Steward, the SFC’s executive director of enforcement, said that RBS would have received a bigger fine had the firm not turned her in to the authorities on a Saturday afternoon. The fact that this act fell on a weekend implied to them that RBS was making an effort to report it immediately rather than wait till the working week began.