Author: Dr. Angelika Hellweger
27 July 2023
2 min read
Angelika Hellweger of Rahman Ravelli details the penalties imposed on the bank and the message they send to the wider financial sector.
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.
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.
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.
Angelika is a specialist in international, high-level economic crime investigations and large-scale commercial disputes. She has widely-recognised expertise in representing corporates and conglomerates in Europe, the Middle East, Africa and United States.