Risk & Compliance

Fed Faults Deutsche Bank Laundering Controls

The bank agrees to pay $41 million for allowing "significant deficiencies" in its monitoring of billions of dollars in potentially suspicious trans...
Matthew HellerMay 31, 2017
Fed Faults Deutsche Bank Laundering Controls

Deutsche Bank has agreed to pay $41 million to settle allegations that it failed to properly monitor billions of dollars in potentially suspicious transactions for money-laundering violations.

The agreement with the U.S. Federal Reserve resolves another investigation into the practices of Germany’s largest bank, which previously was fined $425 million by New York’s main financial regulator over deficient anti-money laundering controls.

Federal Reserve bank examiners identified “significant deficiencies” in Deutsche’s risk management and compliance with Bank Secrecy Act requirements, the Fed said in a consent order.

Those deficiencies prevented the bank from “properly assessing [money-laundering] risk for billions of dollars in potentially suspicious transactions processed between 2011 and 2015 for certain [bank] affiliates in Europe for which the affiliates failed to provide sufficiently accurate and complete information,” according to the order released on Tuesday.

The Fed did not identify any specific transactions but according to the New York Department of Financial Services, Deutsche allowed $10 billion in sham trades involving Russian investors by failing to properly enforce protections against money laundering.

The “mirror trades” were allegedly carried out between 2011 and 2015 and involved clients of Deutsche’s Moscow equities desk acquiring Russian blue chip stocks in rubles and a related counterparty then selling the identical stock in the same quantity and at the same price through Deutsche’s London branch.

As part of its agreement with the Fed, Deutsche is required to enhance its monitoring and investigation criteria and procedures to “ensure the timely detection, investigation, and reporting of all known or suspected violations of law and suspicious transactions,” including those conducted through foreign correspondent accounts.

“We are committed to implementing every remediation measure referenced in the Fed’s order and to meeting their expectations,” Deutsche said in a statement.

The bank’s loans to President Donald Trump have also come under congressional scrutiny, with Democrats last week requesting that it provide information on whether the loans were guaranteed by the Russian government.

Democrats on the House Financial Services Committee also are seeking information about the $10 billion Russian “mirror trading” scheme.