Mitsubishi Corporation reported on September 20 that a Singapore-based subsidiary – Petro-Diamond Singapore (Pte) Ltd. – sustained a loss of approximately US $320 million because of unauthorized trading activities by an unnamed former employee. According to Mitsubishi, the employee allegedly entered into unauthorized derivatives transactions for Petro-Diamond, but was able to disguise them within the firm’s risk-management system as being taken on behalf of customers. The purported illicit transactions were discovered when the employee took an absence from work in August 2019. Petro-Diamond fired the employee on September 18, 2019, and made a referral to local police on the following day.
Memory Lane: A multiyear binge of many unauthorized futures trades by another Singapore-based trader – Nick Leeson – ultimately led to the collapse of Barings Bank in 1995 – at the time, the United Kingdom’s oldest merchant bank. Mr. Leeson’s losses – often hidden in an error account – when tallied up exceeded GB £825 million (US $1.4 billion). After fleeing Singapore, Mr. Leeson was extradited back, pleaded guilty to various criminal charges, including forgery and fraud, and was sentenced to six and one half years in prison in Singapore. He ultimately was released early, and now is an author and frequent lecturer on risk, conduct, compliance, corporate governance and company culture, among other topics. A movie – Rogue Trader – starring Ewan McGregor was released in 1999 based on Mr. Leeson’s experiences. (Click here to access a trailer for Rogue Trader.) Unfortunately, there have been many other incidents of rogue trading in the intervening years throughout the world since Mr. Leeson's episode.