Le Snafu de Societe Generale

Were there any internal controls at this bank?

January 25, 2008

1 Min Read
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The news that French financial giant Societe Generale has lost a massive $7 billion at the hands of a rogue trader has thrown a spotlight onto the bank's internal procedures, notably its policies for monitoring internal communications.

Recent years have seen a booming industry emerge around storing, retrieving, and scanning emails and instant messages for the slightest hint of wrong-doing, so the mind boggles at how a single trader managed to rack up $7 billion in losses.

Precise details of what happened at Societe Generale are yet to emerge, although initial media reports say that the alleged rogue trader acted alone.

At least one security vendor suspects that the bank's email policies will nonetheless be under the microscope. "There have to be systems of checks and balances," said the exec from an email management vendor, who asked not to be named. "Nobody walks into a bank and walks out with $7 billion of cookie jar money."

Societe Generale is in for lots of questioning. When Barings trader Nick Leeson lost $1.4 billion trading on the Asian markets in 1995, an investigation by Singapore's financial authorities was scathing about his employer's lack of internal audit and risk management.Such was the scale of Leeson's actions that Barings ended up insolvent, sending shock waves throughout the financial community.

And that was more than 10 years ago. It seems incredible that a decade on, another individual could wreak even greater havoc, especially when the financial sector is regarded as a technology trailblazer.

One thing: Europe's privacy policies are more stringent than those in the U.S. when it comes to scanning employee email. Maybe this incident will change that. In the meantime, it's yet another cautionary tale for data protection -- if one were needed.

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