Deutsche Bank’s US Unit involved in money-laundering case

Compliance workers for Deutsche Bank AG flagged transaction amounting to $150 billion that their U.S. subsidiary handled for an Estonian unit of Danske Bank A/S. As shown by internal documents, court records and interviews with dozens of people, the U.S. unit of Deutsche Bank largely resisted strict money-laundering compliance for years.

From 1999 through 2006, it handled almost $11 billion of transactions for customers in nations under sanctions: Iran, Syria, Libya, Burma and Sudan. Later, it helped rich Russians move $10 billion from their country using “mirror trades”, bypassing money transferring regulations. During this period, they also provided banking services for Kenyan fraudsters, a Columbian drug cartel, and Russia’s Sberbank PJSC (involved in the financing of potential nuclear technology); even though the bank was not accused of any wrongdoing in those cases.

In Danske’s case, Danish regulators say Estonian employees covered up money-laundering violations for years. From 2007 to 2015, the bank has admitted that roughly $230 billion that passed through that subsidiary was suspicious. A person familiar with the matter confirmed that at least $150 billion flowed through Deutsche Bank, and one report put the figure at about $185 billion.

Anti-money-laundering efforts are based in a Jacksonville site since 2010. Their work revolves mostly around “Know Your Client’ (KYC) procedures. Indeed, U.S. rules under the Bank Secrecy Act require bankers to keep tabs on who they’re working with, to prevent criminals and terrorists from injecting illicit cash into legitimate investments. But in Jacksonville, the concerned office was overly permissive, insiders recall.

And Deutsche executives’ public responses to the Danske case evade concerns about “know your customer” efforts. They have argued that the Danish bank was the only customer they were required to know, as they had a correspondent relationship with it, not clients who were banking with Danske. But it’s not that simple: U.S. banking laws require correspondent banks to make sure their customers have policies and procedures in place to check their own clients, especially for big transactions.

In its annual report last month, the bank urgently highlighted the importance of that fight to investors. Failure to fix its money -laundering protections quickly would mean its “financial condition and reputation could be materially and adversely affected,” the bank said.

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Date: 3rd April 2019

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