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UK Regulator v. Luxembourg Regulator

The Financial Services Authority (FSA) fined UBS AG (UBS) £8million for systems and controls failures that enabled four employees to carry out unauthorised transactions involving customer money on at least 39 accounts. The £8m fine is the third largest the FSA has ever imposed.

The FSA investigation found that UBS had failed to:

  • manage and control the key risks, and the level of risk, created by its international wealth management business model;
  • implement effective remedial measures in response to several warning signs that suggested the business' systems and controls were inadequate; and
  • provide an appropriate level of supervision over customer-facing employees.

By the way, what was the pragmatic solution for UBS in Luxembourg in the context of the Madoff affair, with issues similar to the ones that are fined by FSA (poor execution of the due diligence obligation, failure of human and technical means and of internal rules) ?

Let's read again a press release from CSSF and the happy end in another press release:

On 25 February 2009 the Commission de Surveillance du Secteur Financier (the "CSSF") ordered UBS (Luxembourg) SA ("UBSL") to implement, within a period of three months, the necessary infrastructure, i.e. sufficient human and technical means and the necessary internal rules in order to fulfil all the tasks relating to its function of depositary bank of a Luxembourg UCI in accordance with the Law of 20 December 2002 on undertakings for collective investment, as amended, and Circular IML 91/75, and to provide evidence and guarantees thereof.

After several updates of a draft, UBSL submitted to the CSSF by post dated 25 May 2009 a final detailed report regarding improvements made to its infrastructure and substantial amendments to its internal procedures relating to the function of depositary bank. After analysing said report, the CSSF is of the opinion that UBSL has now delivered evidence and guarantees of having the necessary infrastructure and the necessary rules for its internal organization in place, in line with the injunction imposed on it and in compliance with professional standards applicable in the Grand Duchy of Luxembourg.





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