* UK's FSA fines UBS 8 mln stg, third-largest ever penalty

* UBS staff made unauthorised forex, precious metals trades

* UBS has paid more than $42 million to compensate clients (Recasts, adding fresh quotes)

By Kirstin Ridley

LONDON, Nov 5 (Reuters) - Four former dealers at UBS (UBS.N: Quote, Profile, Research) (UBSN.VX: Quote, Profile, Research) plundered customer accounts to trade and dumped the resulting losses on them, Britain's financial regulator said, further denting the battered Swiss bank's reputation.

The scandal has cost UBS more than $55 million as the Financial Services Authority slapped on an 8 million pound ($13.2 million) penalty -- its third largest ever -- and the bank compensated clients by more than $42 million.

The Zurich-based bank's systems and controls failed to prevent four London-based employees carrying out unauthorised trades on at least 39 accounts over almost two years, the FSA said on Thursday.

The four dealers at UBS -- struggling to rebuild its reputation after a high-profile U.S. tax fraud probe -- traded foreign exchange and precious metals using customer money, with as many as 50 trades a day taking place at the peak.

"These employees were able to take advantage of UBS's inadequate systems and controls, giving them free rein to make unauthorised trades with customer money that they were then able to conceal," said Margaret Cole, FSA director of enforcement and financial crime.