A preliminary report released by Socit Gnrale says a lapse in controls led to not discovering the trade fraud sooner.
Trader Jrme Kerviel began making unauthorized transactions in 2005, and was undiscovered by the bank until January, resulting in a 4.9 billion loss. The report says, On the whole, the controls provided by the support and control functions were carried out in accordance with the procedures, but did not make it possible to identify the fraud before January 18th.
The report says the failure of the bank to prevent the fraud can be attributed to both the techniques of the fraudster and failures in its operating system. The operating staff at the bank did not carry out systematic checks and the bank lacked certain controls that might have prevented the fraud.
Socit Gnrale has already identified weaknesses in its supervision and control system and implemented action plans for three priority areas: IT security; reinforcing controls and alert procedures; and strengthening the organizational structure and governance of the operational risk prevention system.
The report, presented by a committee of three independent directors, will be reviewed by Price Waterhouse Coopers. The committee, composed of three independent directors, says it cannot reach definitive conclusions, but will present an update to the report at the banks shareholders meeting on 27 May, the New York Times reports.