PwC finds control weaknesses at SocGen

by Penny Sukhraj

12 Jun 2008

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A report by PricewaterhouseCoopers has pointed to problems in the design and implementation of French bank Societe Generale's control system.

'Several key controls that could have identified fraudulent mechanisms were lacking,' the report stated, adding that the procedures linking the different levels of checks were insufficient.

The chairman of the bank Daniel Bouton admitted that the bank's internal controls had faults.

'The controls were carried out in accordance with the rules for each area concerned.

'But "a horizontal method for assessing the risk of fraud, (and) a pooling of the information, was missing.

'It was the lack of this method that allowed Jerome K to play on the different deficiencies, which his experience in the back-office had
enabled him to see,' Bouton said.

The bank lost more than seven billion dollars earlier this year, which it said were a result of rogue trading by Jerome Kerviel, AP reported.

Kerviel has since been charged with breach of trust, fabricating documents and illegally accessing computers.

He is currently out on bail and has denied the charges, instead alleging that his managers knew about his massive deals and that he has been made a scapegoat.

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