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Thursday, September 16, 2021

Deutsche Bank fined €500m by UK and US for Russia ‘money-laundering’ failings

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Deutsche Bank has been fined more than £500 million after British and US regulators found that failings at the German lender led to 10 billion dollars (£7.9 billion) being laundered out of Russia in a manner “highly suggestive of financial crime”.

The UK’s Financial Conduct Authority (FCA) slapped the bank with a record £163 million penalty for anti-money laundering shortcomings and exposing the UK’s financial system to criminal activity.

The New York State Department of Financial Services fined Deutsche Bank 425 million US dollars (£340 million) for the abuses, which it says took place at its Moscow, London and New York offices.

The FCA said the German lender failed to maintain an adequate anti-money laundering (AML) control framework from 2012 to 2015.

The regulator added that Deutsche Bank exposed the UK financial system to the risks of financial crime by failing to properly oversee the formation of new customer relationships and the booking of global business in the UK.

As a consequence, Deutsche Bank was used by unidentified customers to transfer approximately 10 billion US dollars (£7.9 billion) of unknown origin from Russia to offshore bank accounts in a manner that is “highly suggestive of financial crime”.

Mark Steward, director of enforcement and market oversight at the FCA, said: “Deutsche Bank put itself at risk of being used to facilitate financial crime and exposed the UK to the risk of financial crime. The size of the fine reflects the seriousness of Deutsche Bank’s failings.

“We have repeatedly told firms how to comply with our AML requirements and the failings of Deutsche Bank are simply unacceptable.

“Other firms should take notice of today’s fine and look again at their own AML procedures to ensure they do not face similar action.”

Among the litany of failings the FCA uncovered at Deutsche Bank’s corporate banking and securities division were:

* Inadequate customer due diligence;
* Failure to ensure its front office took responsibility for its Know Your Customer obligations;
* Flawed customer and country risk rating methodologies;
* “Deficient” AML policies and procedures;
* Inadequate AML IT infrastructure.

According to the FCA, the failings allowed the front office of Deutsche Bank’s Russia-based subsidiary, DB Moscow, to execute more than 2,400 “mirror trades” used to transfer more than six billion US dollars from Russia using its UK division.

The cash ended up in overseas bank accounts in countries including Cyprus, Estonia and Latvia. A further 3.8 billion US dollars in suspicious “one-sided trades” also occurred.

For its part, Deutsche Bank agreed to settle at an early stage of the FCA’s investigation and therefore qualified for a 30% discount on the fine, which cut it down from £229 million.

The FCA said Deutsche Bank was “exceptionally co-operative” during the investigation and has committed “significant resources” to a large scale remediation programme to correct the deficiencies identified.

The New York State Department of Financial Services found that Deutsche Bank and several of its senior managers missed key opportunities to detect, intercept and investigate the scheme.

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