Four traders involved in National Australia Bank's trading scandal that cost the bank Aus$360 million exploited loopholes in the bank's systems, PricewaterhouseCoopers (PWC) said.
PWC was commissioned by the bank to investigate how the foreign exchange options traders, Mr Luke Duffy, Mr Gianni Gray, Mr David Bullen and Mr Vince Ficarra, were able to go undetected for up to three months before junior staff alerted management.
In its report, PWC noted that the risk exposure of the currency options desk to the US dollar increased significantly in late 2003, which resulted in significant losses when the US dollar fell against the Australian dollar.
It found that during the financial year to September 30, 2003, the traders regularly under- and over-reported profits, concealing the desk's true performance but that during September, new transactions greatly increased exposure to the weakening US dollar.
It said the traders incurred losses of Aus$35 million in September 2003, again concealing these losses by false transactions, enabling them to achieve an apparent annual profit of Aus$37 million.
The practice of concealing losses by the traders started in September 2001, and, by using incorrect dealing rates for genuine transactions, the traders shifted profits and losses from one day to another.
PWC said later the traders processed false spot foreign exchange and false currency option transactions to conceal trading losses.
They did this by entering false transactions into the currency options trading and processing system, Horizon, just before the end-of-day close at about 8 a.m. the next morning while the operations division started the process of checking transactions at about 9 a.m. each day.
AFP