SEC Fraud

Kweku M. Adoboli is about as dangerous of a white collar criminal as you can find. Charged last Thursday in British court with one count of fraud and two counts of false accounting, don’t let the seemingly small crimes fool you. Mr. Adoboli may very well be responsible for costing his former employer UBS their entire profits for the whole of the business quarter. His outright criminal actions are not the makings of what brought the economic system crashing down back in 2008, but his risk-taking behavior and the evident ease in which he operated (the charges against him go back to the beginnings of the recession) brings back bad memories of the past. Big banks have barely begun to regain the level of public respect they held prior to the fall of 2008. Actions such as those committed by Mr. Adoboli further diminishes the low-hanging opinion about banks held by the overwhelming majority of the people.

If news of major internal banking scandals based on risky behavior could come at the least optimum time for big banks, now would be it. United States lawmakers are expected to start introducing legislation over the course of the next several months written to impose strict regulations on banks that built their wealth and equally lost most of it due to the practice of proprietary lending. The behavior, which basically entails a bank making massive bets for the benefit of themselves rather than customers, was a leading cause of the corrosion that led to the financial collapse of 2008. There’s big government incentive to rid the banking system of the risks involved in this practice through stiff no-nonsense regulations.

The voices of big banks claim that such regulations would be detrimental to their ability to take the necessary steps to recover the losses sustained over the last several years. Essentially, their argument is that such laws are impossible to write to include everyone, and only lead to further centralization of risk due to the inability of more institutions to engage in the practice. The main target of their offensive, the Volcker Rule named after former Federal Reserve chairman Paul A. Volcker, was written specifically to prevent banks from speculative betting with their own money. It’s obvious then why they aren’t interested in this becoming law.

But none of these proposed regulations and new laws are written to stop the kind of criminal behavior Mr. Adoboli is currently sitting in a London cell for possibly perpetrating. They’re simply compliance measures, meant to curtail the sorts of risk-taking that contributed to the 2008 financial collapse. In order for regulations and penalties to be put in place to keep people like Mr. Adoboli from continuing to individually put the future of banks and businesses at risk, someone will have to cause a financial crisis by committing it.

Mr. Adoboli got shockingly close.