Software to catch rogue traders could save billions

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The Independent Online

They may be self-proclaimed masters of the universe, concealing mind-bogglingly complex financial deals capable of bankrupting small continents– but rogue traders might not be so smart after all.

Corrupt City high fliers, who can lose their employers billions in illegal or unauthorised transactions, are leaving incriminating email trails which could expose their activities before losses soar too high.

A new weapon against finance fraud reveals the same remarkably prosaic phrases crop up time and again in messages sent between corrupt employees. The most common is "cover up" whilst "off the books", "write off" and "they owe it to me" feature in the top 10.

Software developed by accountancy firm Ernst & Young together with the FBI has uncovered 3,000 examples of the potentially incriminating phrases which if identified early enough, could save companies millions of pounds in lost profits.

Those who fear being caught may also give themselves away by using phrases such as "do not volunteer information". Traders under pressure can signal danger by telling colleagues they "want no part of this" or are "not comfortable". The system can also be applied to SMS.

Dr Rashmi Joshi, director of Ernst & Young fraud investigation and disputes services said too often, regulators and investigators only begin examining emails when it is already too late.

She said: "Emails, sent in their thousands, between employees, officials, and external parties form the major part of what is mostly positive daily interaction in companies.Most often, such email traffic is only seized upon by regulators or fraud investigators when the damage has been done. Firms are increasingly seeking to proactively search for specific trends and red flags – initially anonymously –but with the potential for investigation where a consistent pattern of potential fraud is flagged."

There is widespread concern over market manipulation such as the attempted fixing of the London inter-bank lending or Libor rate which underpins trillions of pounds-worth of loans and contracts each day. The scandal saw Barclays fined £290m and led to the resignation of chief executive Bob Diamond and other senior executives. A number of other banks are also under investigation.

In November, Kweku Adoboli was jailed for seven years for recklessly gambling huge sums in off-the-book deals which cost his employers, Swiss bank UBS, £1.5bn.

The software also scans for phrases such as "call my mobile" or "come by my office" which might suggest an employee wants to set up a private meeting with an unauthorised contact. Searches were also able to identify uncharacteristic changes in tones and language.