Paper Example on Unraveling Fraud in Banking: A Case Study of Kweku Adoboli's Illegal Trading at UBS

Introduction

The banking industry, over decades, has suffered losses due to fraudulent activities. There are several scandals involving the loss of multi-billion dollars through stock market investments. For instance, Yasuo Hamanaka went into history for the London Metal Exchange scandal that saw the company lose 2.6 billion dollars (Paul, 2020). Howie Hubler broke the record of the biggest single loss in history by draining 9 billion in a single CDS trade (Paul, 2020). Also, Kweku Adoboli gained the world's attention when he caused a $2.3 million loss for the Swiss bank USB in the United Kingdom through illegal trades (Paul, 2020). This paper offers an explanation of why the investment manager, Kweku Adoboli, engaged in illegal trading and discusses one major factor that influenced his behaviors.

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The Background

First, ego made Adoboli become a fraudster. Adoboli worked for UBS Bank in London for the first time as an intern (Paul, 2020). Due to his outstanding performance, the institution called him back for a permanent job, which saw him escalate leadership ladders to achieve the director position, from a mere trading analyst (Paul, 2020). By this time, his salary was approximately £200,000 (Paul, 2020). According to some interviews that Adoboli has been to, he comes out as an intelligent person who is capable of manipulating things to his advantage without the notice of anyone around him (Paul, 2020).

Since Adoboli wanted to be famous for his outstanding performance at the bank, he went to a greater extent, without realizing it until it was too late. Since the bank's management was always in praise of his success, Adoboli did everything within his power to please them to be ahead of the other workers (Paul, 2020). The investment manager falsified information that he used in the UBS bank's computers to conduct dubious trade (Paul, 2020). Due to pride, Adoboli did not realize the extent of his mistakes until the bank had lost money. In his several interviews, he acknowledges that sometimes it becomes impossible for someone to acknowledge defeat since people would lose trust in their competence (Paul, 2020). Even when Adoboli realized that his activities were causing imminent losses, he could not refuse the senior management's demands (Paul, 2020). For Adoboli, saying that a task was too complex for him to accomplish was a sign of failure that his pride would not let him withstand (Paul, 2020). It would hurt his reputation as a promising smart investment manager. Adoboli wanted to be the greatest of all the other workers, and this led to his fall.

Also, the social system motivated Kweku Adoboli to engage in illegal trades. The people in capitalist society use others for their self-interest and discard them when things go wrong. Those in power always require others to perform exceptionally without caring about the means they use, as long as they are bringing in money. However, when things get out of hand, they distance themselves and demand accountability. Kweku Adoboli was motivated by this capitalist society to engage in wrongdoings (Fortado, 2015). He was the man that almost everyone went to whenever they needed help with bookkeeping. He always helped them balance them out, but they never bothered to know how he managed.

Even the bank's management always entrusted Kweku Adoboli with the responsibilities but never scrutinized his actions because they wanted results. Kweku Adoboli narrates an account where a senior manager needed his help. They had forgotten to book a client for 14 days and would face a $1.5m loss (Fortado, 2015). Due to his competence, he could fix the problem, and no one ever bothered to know how he had managed. However, when Adoboli's trade dealings became unmanageable, they accused him of illegal trade (Fortado, 2015). However, when he was making a profit from the same trade, they were okay with it. Society becomes so preoccupied with amassing wealth that it never questions the process. However, when losses occur, people demand explanations. It is this pressure to perform that made Adoboli engage in illegal dealings.

Why Kweku Adoboli Committed Fraud

Every trader gets into the business because they want to make extra money in the shortest time. Some factors must play a part for this to happen. In stock exchange trade only, the end justifies the means since their principal aim is to win and ensure the other party loses. With this, it is possible to say that Kweku Adoboli engaged in fraudulent trading due to profit motive and greed, which was facilitated by his ability to gamble (BBC, 2016).

First, Kweku Adoboli engaged in the trade due to profit motive as he wanted to make more money in the shortest span. When he worked as an intern, the bank saw his potential as a trader, the reason they brought him in after he graduated (BBC, 2016). Kweku Adoboli used the bank money to bring in more, and it was working for him from the start. He says that he used to work on a very volatile Profit and Loss accounting book, which had over 4,000 moving parts (Fortado, 2015). However, even with this, they would sometimes make $5 million per day, but he could not understand how it could happen (Fortado, 2015). Due to this, he became curious and wanted to make more money, and the only way was to use the bank's money. Since Kweku Adoboli was determined to profit from the bank, he had to come up with dubious ways to make his dealings work whenever he was making a loss.

In the stock exchange industry, profit-making indicates that the trader is doing well, and he had to go the extra mile to depict this. During the court interrogation, Kweku Adoboli told the judge that he was under pressure to perform by his bosses because they wanted results. The results here meant high-margin profits (BBC, 2016). Even when he made some, they wanted more. In an email he sent to his boss, Steward, when things went sour, Adoboli confesses how futile his efforts to make a profit had become, and he was ready to take responsibility (Fortado, 2015). He explained clearly all the manipulations he had done on the trade books to evade the notice of the other colleagues, all because he wanted to make extra coins, but the stock market would never let him, as it was "too aggressive" at that time (Fortado, 2015).

Secondly, Adoboli was motivated by greed. At first, the trader intended to profit from the bank, but the motive changed when he started making a lot of money. His desire for more made him put the bank’s assets at stake by gambling with the bank's resources because he wanted to win back. Therefore, he wagered with the bank's money to make an extra profit (Fortado, 2015). Greed played a role when Adoboli could never stop trading, even when he saw things going down the drain. Going to the extent of manipulating the profit and loss books is a sign of avarice.

Traders always receive incentives depending on how aggressive they are in their trading dealings. The more money one makes, the more the bonuses they get. For instance, during this time, Adoboli’s bonus stood at £250,000, and his working more meant that this figure would even go higher (BBC, 2016). To express greed, Kweku Adoboli was so much fixed on profit-making that he did not see any eventualities. For him, what mattered most was making more money, and not the process that would be used to do so (Fortado, 2015). With this motivation, he came up with the fall financial records to facilitate his rapacious deals (Fortado, 2015). In his long email, Adoboli explains why his colleagues could not detect anything wrong with the books because he had manipulated them to serve his interest (Fortado, 2015). He writes that the ETF trades on the ledger were nothing real since he had fabricated them to create profit, but the market turned against him, making massive losses (Fortado, 2015).

Levels of Analysis for The Kweku Adoboli Case

Various analysis levels try to explain why individuals and give any specific behaviors that are unethical. From the Kweku Adoboli case, four levels are evident. They are individual, organizational, industrial, and societal levels.

Individual-level factors

Individual-level factors encompass a person's attributes that make them more inclined to exhibit a specific behavior. Adoboli is smart, aggressive, and daring, character traits that make him culpable for fraudulent dealings at the USB bank (Fortado, 2015).

Most people who have interviewed Adoboli describe him as a brilliant and enthusiastic young man. When Adoboli enrolled for an internship at the USA bank, the boss saw a promising young man with the potential to become a super trader (BBC, 2016). Due to this, they called him back for a permanent job, whereby they started him off at the lowest level and promoted him up the ladder consistently. The management did this because of this man's intelligence, which could be expressed by the results of his work.

Consequently, Adoboli attended the best schools in England, where it happened to be the school leader at one point (Fortado, 2015). This explains that this young man was sharp-minded, and he used this charismatic charm to win those around him. At the workplace, colleagues believed in him and his ability to solve problems anytime the Profit and Loss books had a problem (Fortado, 2015). As one of his colleagues described him, Adoboli was the kind of a man who would always get things right, no matter how complicated (BBC, 2016). For this reason, the management believed in him and entrusted him with a delicate duty to trade in a stock exchange. This also might have given Adoboli the confidence to engage in reckless trading.

Secondly, Adoboli is aggressive and daring. He comes out as an aggressive individual; he's always ready to solve problems without backing down. Due to this attribute, the bank's management entrusted him with the responsibility of being in charge of a very complex and volatile profit and loss book (BBC, 2016). The exposure to these huge assets made it possible for Adoboli to engage in excessive gambling and trading. At one point, he became daring enough to engage on the IG Index and City Index, betting accounts with his money, but he lost. Kweku Adoboli also was courageous enough to exceed the bank per employer daily limit expenditure of $100 million in trading (Fortado, 2015). Therefore, Kweku Adoboli's daring and aggressive nature might have acted as his weakness, making him spend the bank assets, accumulating a $2.3 billion deficit (Fortado, 2015).

Organizational level

At the organizational level, a person can be influenced to make certain decisions that they would not have otherwise made independently due to the corporate culture and work ethics. Corporate culture can be defined as the behaviors and beliefs that control the management's interactions and the employees in an organization. Work ethics refers to accepted codes of conduct that determine whether an action is moral or not. The corporate culture and work ethic influenced Kweku Adoboli to make irrational decisions that led to a loss of $2.3 billion (Fortado, 2015).

The USB’s lax organizational standards influenced Adoboli to become careless in his trading (Fortado, 2015). Even though the trader made a profit, no management member cared to know how this happened. The company was so preoccupied with profit-making that it did not care what Adoboli did to withstand the market competition (Liverpool John Moores University, 2017). The management did not also conduct routine external auditing. Adoboli took advantage of its laxity to exploit the books of account (Fortado, 2015).

The organization lacked ethical concerns due to the unfavorable external and internal financial environments that demanded they work extra hard to make profits (Fortado, 2015). It was durin...