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Red tape is bogging down fight against rogue traders, says Nick Leeson

Published 22/08/2016

Rogue trader Nick Leeson spent six years in jail for his part in bringing down Barings Bank
Rogue trader Nick Leeson spent six years in jail for his part in bringing down Barings Bank

Britain's financial regulators are too bogged down in paperwork to focus on catching the next rogue trader, according to Nick Leeson - the man who single-handedly brought down one of Britain's oldest banks.

Mr Leeson - who spent more than six years in jail after losing hundreds of millions of pounds in risky trades that resulted in the collapse of Barings Bank in the mid-1990s - said fraud detection had undoubtedly improved over the past 21 years, but organisations were now failing to take advantage of technology which could free staff to conduct new investigations.

"Systems have gotten better, people got better and we still have a ways to go, but we've potentially gone too far that other way," Mr Leeson said.

"What you regularly hear from people in those roles is that there's so much paperwork that they have to deal with, so many regulations that they have to deal with, it's detracting from what they should be doing: testing, pushing, prodding and challenging."

His comments come after a spate of high-profile convictions for financial misconduct, such as former trader Tom Hayes, who is serving an 11-year jail sentence for manipulating libor interest rates.

Former UBS trader Kweku Adoboli spent three years behind bars after his unauthorised trades cost the Swiss bank 2 billion US dollars.

Mr Leeson warned that if there was to be another scandal, it would likely occur in emerging markets.

"The fear of a rogue trader now is vastly diminished. If one is going to occur, it's not going to be in the US and UK, it'll be somewhere further afield where the market is still developing," he said.

The 49-year-old also noted that the Serious Fraud Office (SFO), which has come under fire for failing to secure enough convictions, had come a long way.

"Back in 1995, when I was interviewed by the SFO they were shockingly bad," Mr Leeson said. "The forensic accountant in charge of our case, I had to hold his hand through everything we needed to explain to him. I think they've improved but it's all about quality."

Throwing "hundreds of people" at issues such as fraud and rogue trading wasn't going to solve the problem, he stressed.

"In 2016, the tech should be good enough to ensure that you have the analytics that you need," Mr Leeson said.

A Bloomberg report earlier this year claimed HSBC was hiring as many as 175 financial crime compliance officers for their UK retail banking operations alone, adding that the bank's compliance team had jumped to 9,000 from 1,500 in 2010.

Mr Leeson has resurfaced in recent weeks in an effort to publicise his online course on financial trading run by e-learning company Bizintra set to start in September.

The free webinars will run ahead of his paid course on risk management slated for January, though the speaking circuit still serves as the former rogue trader's main source of income.

Mr Leeson explained he still traded on financial markets, but on a personal basis.

Some may be rightly sceptical about taking his advice, but he says potential pupils can learn from his mistakes.

"My name comes with an obvious warning that people can potentially lose a lot of money," he admitted, adding that new traders needed to learn how to take a loss.

"No one expects to trade and lose money," Mr Leeson said.

The former rogue trader said back in the days of Barings Bank, he fell victim to hubris.

"I was not disciplined, I was stubborn....I couldn't understand that I'd be making those trades and lose money.

"I'm very candid and honest about the mistakes I made. If some people end up listening to me and taking my advice - and that advice being geared around some of mistakes - then hopefully people won't make those mistakes in future."

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