Unauthorized Use of Company Funds and Leveraged Losses: Warning Signs for Corporate Treasury Controls
“The market amplified the loss, but weak control over funds and authority made it possible.”
A recently reported case involving a Hong Kong wealth management company shows how quickly losses can escalate when unauthorized use of company funds is combined with high-risk leveraged trading.
According to reports, a 26-year-old investment manager who had been with the company for approximately six months allegedly used around HK$50 million of company funds for investment purposes without authorization. He reportedly increased the size of the position through margin financing and then concentrated the funds in a leveraged product designed to deliver twice the daily performance of SK Hynix shares.
As the price of the leveraged product fell sharply, reports suggested that the losses could reach approximately HK$150 million. However, because the position had reportedly not been fully liquidated at the time, the final loss may vary depending on the eventual liquidation outcome and the results of the investigation.
At first glance, this may appear to be a case of unauthorized trading specific to a financial institution. But the more fundamental question applies equally to non-financial companies:
Can a single employee use company funds without authorization, or deploy them in a way that differs from their approved purpose?
Non-financial companies also engage in a wide range of Treasury transactions, including surplus cash management, term deposits, bonds, funds, foreign exchange transactions, derivatives, and intercompany lending. If transaction execution and fund transfer authority are concentrated in a single individual and independent review is weak, similar control failures can occur even in companies that do not engage in sophisticated investment activities.
Examples may include:
• Managing funds through unauthorized financial products or accounts
• One employee being involved in multiple conflicting roles, such as transaction initiation, execution, approval, and post-transaction review
• Transactions that fall outside approved Treasury or investment policies
• Excessive concentration of funds with a particular financial institution or account
• Fund movements classified as intercompany loans or deposits where the underlying economic substance is unclear
The key issue in this case is therefore not simply that the investment decision turned out to be wrong. The more important question is whether one employee was able to deploy a significant amount of company funds without authorization, and whether sufficient independent controls existed over the level of risk the company was being exposed to.
For non-financial companies, reviewing Treasury transactions should therefore go beyond simply checking bank balances or investment returns.
Companies should also examine who initiated the movement of funds, what approvals were obtained, which accounts the funds were transferred to, and for what purpose they were ultimately used.
From a practical perspective, the following signals can be reviewed through data-driven monitoring:
• Whether newly hired or short-tenured employees have excessive fund transfer authority
• Whether the same employee performs conflicting roles such as execution and approval
• Whether a specific employee’s Treasury-related activities are disproportionately concentrated outside normal business hours or on weekends
• Whether a specific employee makes an unusually high number of changes to bank account, vendor, or other master data
• Whether payments occur shortly after bank account information is changed outside normal business hours
• Whether transaction approvals are excessively concentrated with a particular approver
• Whether transactions repeatedly occur just below approval thresholds
• Whether multiple payees share the same or linked bank accounts
• Whether the payment method, destination country, or transaction amount of cross-border transfers meets predefined high-risk criteria
These reviews do not assess the market risk of an investment product or the degree of leverage itself. However, they can help identify early warning signs across the Treasury transaction lifecycle, including concentration of authority, segregation-of-duties conflicts, unusual approval patterns, abnormal bank account changes, and irregular fund movements.
GRAM Radar is a data-driven Financial Risk Quick Scan designed to assess financial and transactional data for patterns such as abnormal employee activity, approver concentration, role conflicts, unusual bank account changes, repeated fund transfers, and transactions occurring near approval thresholds.
Rather than viewing this case solely as an unusual investment failure at a financial institution, companies may benefit from asking a broader question:
Could a Treasury employee in our organization use company funds outside the approved authorization structure or Treasury policy without being detected promptly?
