Deutsche Bank ordered to take action on money laundering

FRANKFURT: Three years ago, Deutsche Bank AG pledged to improve internal controls to avoid a repeat of fines that had eroded earnings and damaged trust. Yet from the US to Germany, regulators keep spotlighting the lender’s failures.

In the latest reprimand, the German markets regulator on Monday said it ordered Deutsche Bank to improve money-laundering and terrorism-financing controls, and took the unprecedented step of appointing a monitor to oversee the efforts.

The move is a reminder of the scale of the challenges Deutsche Bank faces in improving compliance and oversight of its businesses after spending some US$17bil on fines for misconduct and to resolve other legal claims over the past decade. The Federal Reserve last year designated the bank’s US business as “troubled” and in June Deutsche Bank failed its annual stress tests in part because of “widespread and critical deficiencies” in internal controls.

BaFin’s action was prompted by Deutsche Bank’s insufficient efforts to improve its controls rather than a specific case of money laundering, according to two people familiar with the matter, who asked to remain anonymous because details of the matter are private.

“We are in agreement with the BaFin that we have to improve these processes in the corporate and investment bank further,” Deutsche Bank said in a statement on Monday.

“The bank will work together with the BaFin and the special representative KPMG to fulfill the regulatory requirements as soon as possible and within the given time frame.”

Deutsche Bank joins a small crowd of European lender to be singled out recently for lax money laundering controls. Denmark’s Danske Bank A/S last week admitted that about US$234bil of funds flowed through a tiny unit in Estonia, a lot of which was deemed suspicious. ING Groep NV ousted its chief financial officer earlier this month after receiving a US$900mil fine related to money laundering, while Credit Suisse Group AG also was censured by Switzerland.

Deutsche Bank acknowledged in August that its anti-money laundering processes remained inefficient more than a year after it was fined almost US$700mil for helping wealthy Russians move about US$10bil out of the country.

The lender was fined by UK and US authorities for compliance failures, including methods that the New York Department of Financial Services said could have been deployed to facilitate money laundering. — Bloomberg