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Deutsche Bank fined over £500m after Russia money laundering probe

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The FCA has fined Deutsche Bank more than £163m for anti-money laundering failures between January 2012 and December 2015.

The fine is the largest ever imposed by the FCA or the FSA for anti-money laundering control failings.

The bank has also been fined $425m (£339.9m) by the New York State Department of Financial Services.

A statement from the FCA says Deutsche Bank failed to properly oversee new customer relationships and the booking of global business in the UK.

As a result of its inadequate controls, Deutsche Bank was used by unidentified customers to transfer approximately $10bn, of unknown origin, from Russia to offshore bank accounts in a manner the FCA says is “highly suggestive of financial crime”.

The front office of Deutsche Bank’s Russia-based subsidiary, DB Moscow, carried out more than 2,400 pairs of trades – called mirror trades – between April 2012 and October 2014.

The mirror trades were used by customers of Deutsche Bank and DB Moscow to transfer more than $6bn from Russia, through Deutsche Bank in the UK, to overseas bank accounts, including in Cyprus, Estonia, and Latvia.  The orders for both sides of the mirror trades were received by DB Moscow, which executed both sides at the same time.

The customers on the Moscow and London sides of the mirror trades were connected to each other and the volume and value of the securities was the same on both sides.

The FCA says the purpose of the mirror trades was the conversion of roubles into US dollars and the “covert” transfer of those funds out of Russia, which is highly suggestive of financial crime.

A further $3.8bn in suspicious “one-sided trades” also occurred. The FCA believes some, if not all, of an additional 3,400 trades formed one side of mirror trades and were often conducted by the same customers involved in the mirror trading.

FCA enforcement and market oversight director Mark Steward says: “Financial crime is a risk to the UK financial system. Deutsche Bank was obliged to establish and maintain an effective anti-money laundering control framework. By failing to do so, Deutsche Bank put itself at risk of being used to facilitate financial crime and exposed the UK to the risk of financial crime.

“The size of the fine reflects the seriousness of Deutsche Bank’s failings. We have repeatedly told firms how to comply with our anti-money laundering requirements and the failings of Deutsche Bank are simply unacceptable. Other firms should take notice of today’s fine and look again at their own  procedures to ensure they do not face similar action.”

Deutsche Bank agreed to settle at an early stage of the FCA’s investigation and qualified for a 30 per cent discount in its fine, which otherwise would have been £229,076,224.

The discount does not apply to the £9.1m in commission that Deutsche Bank generated from the suspicious trading, which has been disgorged as part of the overall penalty meaning that the firm has received no financial benefit from the breach.

The FCA statement says: “Deutsche Bank was exceptionally cooperative with the FCA during this investigation and has committed significant resources to a large scale remediation programme to correct the deficiencies in its anti-money laundering control framework and customer files.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. So next step – are these funds going to be traced & if illicit, action against the perpetrators also taken?

  2. In the MM report above there is no suggestion any transactions went through New York and yet their Dept. of Financial Services levies a fine at double the rate of the FCA in London. Why?

  3. What makes me angry is that these people get discounts on there fines !!!! 30% in this case

    un…. bloody…… believable

  4. more here – https://www.bloomberg.com/news/articles/2017-01-31/deutsche-bank-fined-204-million-over-money-laundering-failings

    basically the US fine is for the same process done in New York as done in London

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