Banking: Adoboli case has echoes of Leeson

Robert Peston, writing for BBC News, says that he has spoken with a banker who has some background on how Adoboli was allegedly able to carry on a long term fraud without being found out: he started work for the bank in the back office, becoming proficient in the bank's systems. That, it is alleged, was what allowed him - when he later became a trader - to hide the substantial number of transactions that were unauthorised.

The UK's Daily Mail has visited the flat where Adoboli lived for two and a half years, leaving some four months ago. The rent on the large converted soup kitchen was GBP1,000 per week. The landlord, unsurprisingly perhaps, thought his tenant a very nice man.

Adoboli has been charged with a number of offences arising from an alleged USD2.000 million fraud which the City of London Police who are investigating say took place between 2008 and late 2009 - and then again from January until September 2011 when the conduct was discovered.

Adoboli's solicitors are Kingsley Napley, who represented Nick Leeson.

UBS is unhappy: recently it announced cost-cutting measures including cutting 3.500 jobs: that staff reduction was expected to save, coincidentally, about USD2,000 million worldwide.

The bank's shares have plunged, taking with them a sector that is already jittery about national debt and the prospects of another recession.

The loss is not going to bring down the bank - it is already supported by the Swiss taxpayer after being caught out in the banking crisis in 2007 - but it will make life a lot more difficult and there may be further detailed examination of exactly what various divisions contribute with some being hived off or closed.

Questions are being asked about how this could happen and some within the banking sector are pointing out that, if the paperwork matches, the chances of identifying such a fraud are low.

But someone is going to have to pay for the failure to realise what Adoboli, who was pictured leaving court with a broad smile across his face, was up to.

One of the reasons that the trades were not obvious is that Adoboli reportedly made no large trades: many, many small transactions were performed. UBS's internal controls were, perhaps, simply not looking for this type of fraud, a fact that Adoboli may or may not have known.

Indeed, UBS found out about the problems when Adoboli himself reported it to UBS management last week. Within two days, he was in court. But there are allegations circulating that some of Adoboli's colleagues were suspicious of his performance and asked bosses to look into it - but even being aware of a particular problem, they found no evidence until Adoboli gave himself up.

The lesson that was most clear from Barings is "if you don't understand the business, don't do the business." But that lesson has not been learned - everything from the US led financial crisis to the derivatives that Leeson and Adoboli dealt in are complex instruments that managers all to often do not or cannot understand. If the money flows are, apparently, going in the right direction, that's all that matters, it seems.

But both Adoboli and Leeson appear to have used relatively simple false accounting to shield their actual position from their bosses.