CHAPTER 15A Scenario in Internal Fraud

15.1 INTRODUCTION

As the simple example in Chapter 14 illustrates, the exposure measurement for internal fraud is generally the number of employees. Employees having access to specific functions could potentially perpetrate a fraud in their domain.

  • Accountants with appropriate credentials could find a way to create fake suppliers in the accounting system and initiate payments.
  • Employees having access to large volumes of unencrypted card data could compromise these data and sell them to criminal networks.
  • Traders can take unauthorized positions to cover past losses, or even create fictitious positions to accumulate profit. This is the example we will now study in detail.

15.2 XOI MODELLING

15.2.1 Analysis

We will now analyse in more detail the “Rogue Trading” scenario.

The history of Rogue Trading cases goes back to the nineties with the Baring's case, and significant cases are publicly disclosed on a regular basis. Table 15.1 lists the most significant cases from 1995.

TABLE 15.1 Rogue Trading Cases

Year Institution Product Amount ($ billion)
1995 Barings Bank Nikkei Futures 1.3
1995 Resona 1.1
1996 Sumimoto Copper 2.6
2002 Allied Irish Bank FX Options 0.69
2004 National Australia Bank FX Options 0.19
2005 China Aviation Oil Jet Fuel Futures 0.55
2007 Goldman Sachs 0.12
2008 Société Générale Stock Index futures 6.9
2011 UBS Stock Index futures 2.3

The fact that rogue trading activities can also lead ...

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