US probe finds possible Deutsche controls lapses

IFR 2299 7 September to 13 September 2019
3 min read
Americas, EMEA, Asia

US congressional investigators have identified possible failures in Deutsche Bank’s anti-money laundering controls in its dealings with Russian oligarchs, after the lender handed over a trove of transaction records, emails and other documents, three people familiar with the matter said.

The congressional inquiry found instances where Deutsche Bank staff in the United States and elsewhere flagged concerns about new Russian clients and transactions involving existing ones, but were ignored by managers, two of the people told Reuters.

Lawmakers are also examining whether Deutsche Bank facilitated the funnelling of illegal funds into the US as a correspondent bank, where it processes transactions for others, one of the sources said.

The congressional probe, whose initial findings have not been previously reported, is at an early stage. It is not yet clear whether it will lead to any action against the bank, the three sources said.

Deutsche Bank spokesman Troy Gravitt said the bank cannot comment on the work of the congressional committees but remains committed to cooperating with authorized investigations.

He said the bank had addressed past deficiencies in controls and taken disciplinary measures against some individuals and reviewed its client onboarding and monitoring processes.

“COMPROMISED?”

The Democrat-controlled House of Representatives began examining possible money laundering in US property deals involving President Donald Trump, a Republican, earlier this year. The lawmakers are also looking into whether Trump’s dealings left him subject to the influence of foreign individuals or governments.

Deutsche Bank has been drawn into the inquiry as Trump’s biggest lender and submitted documents to investigators in response to a subpoena.

The stakes are high for the German lender, which is trying to engineer a turnaround under Chief Executive Christian Sewing after a multi-year bet on building a global investment banking business unravelled.

Graham Barrow, a financial crime consultant, said that while the bank had since sought to reform, it had taken too many risks in countries such as Russia.

“The bank decided to go for becoming a global investment bank,” Barrow said. “They were compromised.”

In 2017, Deutsche Bank agreed to pay regulators in the US and Britain US$630m in fines for organising US$10bn in sham trades that could have been used to launder money out of Russia. Two of the sources said the preliminary findings of the congressional investigators may have some overlap with that case but also include lapses unrelated to that matter.

New evidence thrown up by the congressional probe could feed into further investigations by other authorities, regulatory experts said.

If evidence of wrongdoing is found, it could also harm the bank’s efforts to strengthen its relationships with US regulators and deter investors concerned about the possibility of future regulatory sanctions. Deutsche Bank’s shares hit an all-time low last month.