Dive Brief:
- The Federal Reserve fined Deutsche Bank and its U.S. affiliates $186 million over “unsafe and unsound” practices that failed to control money-laundering activities, the central bank announced Wednesday.
- Deutsche made “insufficient remedial progress” on 2015 and 2017 consent orders related to its relationship with the Estonian branch of Danske Bank, the Fed said, ordering Deutsche to “prioritize completion” of the controls that would resolve the previous enforcement actions.
- Deutsche Bank did not admit or deny the Fed’s allegations but characterized its progress on the 2015 and 2017 matters as “historic tardiness,” in a statement Wednesday. Deutsche said the fine imposed Wednesday is largely covered by provisions it has taken in the previous fiscal quarters.
Dive Insight:
Under Wednesday’s order, Deutsche Bank must pay roughly $140 million for anti-money laundering violations and around $46 million for unsafe and unsound practices arising from failures to control money laundering related to Danske Estonia, with whom Deutsche shared a correspondent banking relationship until 2015.
The Fed noted that a major portion of the over $276 billion in transactions Deutsche cleared for Danske Estonia from 2007 until the end of the banks’ relationship in 2015 involved “high-risk non-resident customers.” Danske Bank pleaded guilty to bank fraud conspiracy in December.
Deutsche Bank fell short of making progress in “compliance oversight, customer due diligence, transaction data, transaction monitoring and filtering, suspicious activity reporting, and facilitating independent third-party reviews,” the Fed said Wednesday.
The bank may face additional penalties if it doesn’t fix its outstanding issues, the Fed said.
“The material failure to remediate the unsafe and unsound practices or violations described herein may require additional and escalated formal actions by the Board of Governors against [Deutsche], including additional penalties or additional affirmative corrective actions,” the Fed said Wednesday.
Deutsche, in its statement Wednesday, said it is “committed to maintaining robust risk management programs with a special emphasis on Anti-Financial-Crime and Compliance controls.”
The Fed also issued a written agreement to address the lender’s shortfalls in governance, risk management and controls.
Wednesday’s penalty marks the latest one faced by Deutsche in its struggles with U.S. and German regulators. A German consumer group sued Deutsche Bank’s asset-management unit DWS in October for allegedly misrepresenting an investment fund’s green credentials in marketing materials.
Deutsche also agreed in May to pay $75 million to settle claims that the bank benefited from its client relationship with late sex offender and financier Jeffrey Epstein while being aware of his actions.
Deutsche, for the first time, will have its highest-ranking compliance official based in the U.S., Bloomberg reported, when Stefan Simon relocates to New York to take on additional responsibilities once held by former U.S. chief Christina Riley, who left the bank in May to take a role with Santander.
