Wednesday, February 06, 2008

Kerviel is not a computer genius?

An interesting - but purely speculative - article on how Jerome Kerviel, the junior trader being blamed for a recent $7.1 billion Société Générale loss, managed to get away with making large bets. The author has worked in trading environments and some of the "bending" of compliance rules he talks about does have a ring of truth to it.

A few things of note in the article:
  • Kerviel was a junior trader, supposed to be doing riskless arbitrage, not making large bets.
  • Kerviel worked in the risk management department, so he may have been able to explain away some of his fictious trades as "we're working on the reports right now, the numbers in them are not quite right".
  • Being part of the risk management department he might have also had direct access to systems or been told "super user" passwords, allowing him to bypass security.
Oh, if you're interested here is Mr Kerviel's resume:

Update: It appears Mr Kerviel was able to commit the fraud with low-tech techniques like using his colleagues' access codes, sending fake emails used to open accounts and disabling warning systems that might have alerted people to what he was doing (probably just by hacking the production spreadsheets). We'll see if he can develop a fool-proof way to prevent others from using similar techniques at his new computer security consultancy job :)

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