Deutsche Bank To Pay Millions For Sanctions And Money Laundering Failings – White Collar Crime, Anti-Corruption & Fraud

Angelika Hellweger of Rahman Ravelli details the penalties
imposed on the bank and the message they send to the wider
financial sector.

The US Federal Reserve Board has ordered Deutsche Bank to pay
penalties totalling $186 million and improve its
sanctions and
anti-money laundering (AML) efforts.

The action comes after allegations that the bank and several of
its US subsidiaries violated two consent orders from 2015 and 2017,
relating to sanctions violations and internal controls failures,
and had unsafe and unsound anti-money laundering practices.

The bank, which did not admit or deny the allegations, will pay
a $140 million fine for violating the orders. Deutsche Bank had
paid a total of $99 million as a result of the Federal
Reserve’s 2015 and 2017 orders. It will also pay $46 million
for poor AML practices relating to Danske Bank’s scandal-hit
Estonia branch, which was known to be used by Russian
oligarchs.

The 2015 order found that the bank’s offices in Germany and
Bangalore illegally processed transfers in US dollars involving
sanctioned parties through one of its US-based intermediate holding
companies. That order originally resulted in a $258 million fine.
In 2017, another order found that one of its New York
companies’ transaction monitoring systems failed to properly
assess money laundering risks for billions of dollars in
potentially suspicious transactions between 2011 and 2015. This
order led to a $41 million fine. It came 10 months after the New
York State Department of Financial Services fined Deutsche Bank
$425 million for improperly moving more than $10 billion out of
Russia in an illegal stock trading scheme facilitated by the
bank’s Moscow branch.

Insufficient

In the latest action, the Federal Reserve found that Deutsche
Bank’s attempts to put right the problems that led to the 2015
and 2017 fines were insufficient. It also found that the same
Deutsche Bank subsidiary that had the inadequate transaction
monitoring system in 2017 had processed $267 billion in
transactions for Danske Bank’s now-closed Estonia branch, many
of which were high-risk. Last December, Danske Bank agreed to pay
more than $2 billion in December to resolve money laundering
investigations into its Estonia branch by Danish and US
authorities.

The Federal Reserve has now ordered Deutsche Bank to improve its
transaction monitoring systems and establish a customer due
diligence programme that meets the standards set out in the 2017
order. It has also ordered the bank to collect and analyse accurate
information for all account holders, revise its systems for
evaluating customers’ risk, and ensure foreign correspondent
accounts are subject to necessary due diligence. Deutsche Bank will
have to provide the Federal Reserve with documents detailing its
efforts to meet these requirements within 60 days.

Compliance

The problems encountered by Deutsche Bank are a reminder to all
in financial services of both the importance of compliance with AML
obligations and the need to take all possible precautions regarding
sanctions. A failure to do this will only lead to more penalties
– penalties that will be far more expensive than actually
meeting such obligations.

Deutsche Bank’s efforts to put right previous wrongs were
noted by the Federal Reserve – but they were not enough, and
so the bank has paid a high price for its failings

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