Another type of fraud involves outright theft of goods from the company. Say
that in the procurement process, an order is created and approved, goods or
services are received, and then invoiced payments are made. A secretary
places orders for stationery supplies and receives them, taking a large share
of them home. She starts out with pens and then moves on to printer car-
tridges, creating an eBay store for printer supplies to supplement her salary.
In this case, Segregation of Duties (SoD) would have prevented this problem
by requiring that one person create the order, another person receive the
goods or services, and a third person pay the invoices.
The Barings Bank scandal: Operations risk extraordinaire ..........
Some dishonest people, of course, do a lot more damage than a clerk pocket-
ing cash or a secretary filching office supplies. An extreme example of fraud
is the Barings Bank case, where rogue trader Nick Leeson defrauded Barings
Bank and its customers of billions of dollars, causing the bank to collapse.
This was a case of CYA syndrome: Leeson made mistakes and had to employ
a spiral of distraction techniques to cover his, er, tracks.
On Thursday, February 23, 1995, Nick Leeson, assistant director and general
manager of Barings Futures Singapore (BFS), a branch of Barings Bank of
England, left Singapore with his wife and flew to Kuala Lumpur, Malaysia. The
next day, Leeson faxed his resignation to Barings, citing health reasons.
Taken as just a simple account of the activities of an ordinary person over
the course of two days many years ago, this would seem to have no real sig-
nificance. But Nick Leeson was no ordinary person. He was a rogue trader,
and his activities in the few years just prior to 1995 caused the collapse of
Barings Bank, a dramatic event that reverberated for years in the halls of
banking worldwide.
In 1989, Leeson began his Barings employment with the settlements depart-
ment of Barings Securities Limited, the trading division of Barings Bank. He
was just 22 years old. Soon after arriving, he was sent to Hong Kong and
Jakarta to sort out problems with Barings operations in both cities, and he
was successful in doing so. These successes placed Leeson in a position of
favor with his bosses, and in a few years’ time, he was rewarded for his efforts.
In April 1992, Leeson was sent to Singapore to head the settlements and
accounting departments of the newly formed Barings Futures (Singapore)
Ltd. (BFS). This new position also included leading BFS’s Singapore
International Monetary Exchange (SIMEX) floor operation.