Tuesday, January 22, 2008

Largest Bank Fraud $ 7 Billion dollars

French bank SOCGEN, Societe General is the victim of the largest bank fraud of the year total amount $7Billion (over €5billion Euros). A junior trader Jerome Kerviel makes trades that cause the bank substantial losses. Jerome is capable of hidding is actions by modifying the information in the Banks computers.

The trader was able to create fictitious accounts to hide is actions; and support this with falsified documents. In short massive risk, massive losses and total lack of appropriate controls.

In security there is a simple concept known as dual control; under this control critical system transactions of system information can not be updated by a single individual but requires approval and verification from another party or employee in the organization (these controls are contained in the most basic and simple accounting systems). Why were such controls absent or ignored, I am sure the investigations and postmortem analysis will provide plenty of reading....
D.K. Matai good friend and Chairman of Asymmetric Threats also discusses the topic in MI2G press release postings.
Some more recent updates on the story are contained here:
- Reuters Time Line
- Telegraph UK
- the company explanation
- Financial Times


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