Some of the world’s biggest banks are hiring former spies to try and prevent the rise of any more so-called “rogue traders” and generally ensure that banks are put on the hook for fewer fines.
According to a report from Bloomberg, banks including HSBC, Deutsche Bank, and JP Morgan have all hired ex-spies from the likes of the UK and US military, the CIA, and GCHQ to watch the activities of bank employees, and try to prevent misconduct.
Bloomberg cites information provided by recruitment firms, executives, and compliance officers to show that banks are using former spooks to keep tabs on everything from how long employees take for cigarette breaks to how often they text their significant other, and as a result, try and spot the early signs of rule breaking.
In recent years, bank employees like Jerome Kerviel, Kweku Adoboli, and Tom Hayes have all been jailed for their roles in big banking scandals. In 2008,
In 2008, Jerome Kerviel lost €4.9 billion (£3.7 billion) at Societe Generale, and Kweku Adoboli’s trades left UBS on the hook for $2 billion (£1.4 billion) in 2011. Hayes was involved in the fixing of the LIBOR rate, and subsequently jailed for his role, although had his sentence reduced after an appeal.
Not only are these sort of scandals hugely embarrassing for banks, they can also be incredibly costly. The LIBOR scandal, for instance, cost six banks a combined total of around $6 billion (£4.15 billion), with Barclays alone footing a bill for $2.2 billion (£1.5 billion).
Increased scrutiny on the banking sector, thanks in large part to stricter stances from regulators like the SEC in the USA and the FCA in Britain, has led many financial institutions to take big steps to prevent such scandals occurring again and costing them billions.
Bloomberg cites Chris Mathers, a former Canadian police officer, now a consultant, who said: “The biggest threat to banks today, the absolute biggest threat, is the regulator.”
Basically, as a result of increased regulation, banks are putting huge resources into ensuring that they don’t get on the wrong side of regulators, as, in an era where profits are getting more and more squeezed, the ability of banks’ balance sheets to absorb big fines, is getting smaller. UBS announced plans in 2015 to bring in around 350 new compliance staff to the bank, after being hit by a series of big fines, including penalties related to Adoboli’s misconduct.
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