How Can We Stop Rogue Traders?

April 30th, 2008 |
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In this podcast, join BearingPoint Senior Manager Andy Sanderson as he explores rogue trading and what can be done to stop it. Rogue trading is when an employee makes unauthorized trades on behalf of their company, often resulting in the loss of enormous amounts of money for that organization. This activity is often times hard to identify because the perpetrator is a legitimate employee and his actions will sometimes go unnoticed. Rogue Trading is actually very common, but it only hits the press when the company is well known and people come forward to announce the company’s losses.

The question that is most asked is, “How can we prevent it?” While rogue trading cannot be prevented, one can change the environment so that there is less incentive to engage in this act. In most organizations today, there is enough incentive to continue this type of trading because the proper controls have not been put into effect. An organization needs to be aware of activities that are outside of the norm and be knowledgeable of significant gains and losses. With the proper controls, a rogue trader can be identified and stopped before irreparable damage has occurred.

With most laws, there are ways to police them. We need to do this with trading, too. The controls need to be visible so that employees know that people are looking out for this type of behavior, but not too visible where an employee can identify ways to get around it. The most important element of policing this type of behavior is data mining. With the right technology, data mining can identify any odd behavior. The investment in the proper technology will allow companies to identify the culprits once they have engaged in unlawful behavior and before the company’s image has been tainted.

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