System Vulnerable to 'Genius' Rogue Traders

Criminal financial wizards can run amok, experts warn
By Rob Quinn,  Newser Staff
Posted Jan 30, 2008 6:55 PM CST
Nick Leeson, the man who brought down Barings Bank, walks out of jail in Singapore. The story of his market exploits were made into the film "Rogue Trader."   (Getty Images)
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(Newser) – Banks hoping to weed out potential rogue traders need to realize that they can strike anywhere, any time—and that their best traders could be the likeliest suspects, Reuters warns. "All of the things that make a great trader make a great fraudster, too," noted a consultant. Experts say that psychological tests don't work, as great moneymakers and rogues often share the same genius streak.

"There are no foolproof systems," said the former chairman of the US Securities and Exchange Commission, although there are some steps institutions can take to minimize the risk. Mandatory time off for traders is an important one, as it can stop a criminal from giving an ongoing fraud the constant attention and protection it needs. Jérôme Kerviel, the trader behind the $7 billion SocGen fraud, took only four days off last year.