Deutsche Bank fined $41 million for lax controls
WASHINGTON: Deutsche Bank AG agreed on Tuesday to pay $41 million to settle Federal Reserve allegations that its US operations failed to maintain adequate protections against money laundering, the latest in a string of fines that have cost the German lender billions of dollars.
The Frankfurt-based bank’s US operations fell short in complying with the Bank Secrecy Act, which requires lenders to help federal agencies prevent illegal transactions, the Fed said in a brief statement.
The regulator i mposed a ceaseand-desist order on Deutsche Bank that requires it to address “unsafe and unsound practices.”
The bank also agreed to improve its controls and boost oversight of senior management.
“We are committed to implementing every remediation measure referenced in the Fed’s order and to meeting their expectations,” Deutsche Bank said in an emailed statement.
“The fine is within the lender’s expectations,’’ a person briefed on the matter said, suggesting it’s covered by legal provisions that stood at €3.2 billion ($3.6 billion) at the end of March.
Chief executive officer John Cryan has spent almost two years navigating probes, culminating in a $7.2 billion mortgagebond settlement with the US government in January.
He is now focusing on restoring revenue growth after raising $8.5 billion from investors in April to replenish capital eroded by fines.
The bank’s insufficient monitoring involved billions of dollars in “potentially suspicious transactions” processed between 2011 and 2015, the Fed said. The transactions involved affiliates in Europe that failed to provide “accurate and complete information.”
While the Fed didn’t disclose any specific transactions that were improper, Deutsche Bank has faced multiple investigations by various regulators into whether it allowed customers to engage in illicit trades.
Deutsche Bank has recently reached settlements with the UK and New York State’s Department of Financial Services over trades that allegedly helped wealthy Russians move some $10 billion out of the country.
The settlements involved what are known as mirror trades, in which bankers purchased Russian stocks in roubles while selling the same amount of shares in London.
The trades effectively converted roubles to dollars, and the cash flowed from the UK through Cyprus, Estonia and the US, investigators said. The deficiencies cited by the Fed include controls over transactions like mirror trades, said one person with knowledge of the matter.
In its settlement with the Fed, Deutsche Bank agreed to enlist an outside monitor to review transactions with international banks in the second half of 2016 — a time frame that could expand depending on the monitor’s findings.
The bank also agreed for the outside monitor to review its compliance with antimoney laundering laws.
The bank recently unveiled a drive to add 400 new people to its anti-money laundering unit this year, overseen by chief regulatory officer Sylvie Matherat, which would boost the staff level by about 50%.
A settlement on the Russian mirror trades with the US Department of Justice is still outstanding.