On the 31st May 2017, the Federal Reserve Board announced a $41 million penalty and a cease and desist order against the U.S. operations of Deutsche Bank AG for anti-money laundering deficiencies. The Order does not specify what those transactions were although Deutsche Bank was recently investigated for other breaches relating to its alleged assistance to wealthy Russians assisting them, in mirror trades, to move billions of dollars out of Russia. Those funds are said to have been channelled through Estonia, Cyprus, the UK and the US. No settlement agreement has yet been entered into in relation to this conduct.
The Federal Reserve had identified, in an examination of Deutsche Bank’s operations, two issues of concern:
1. The most recent examination of the Bank Secrecy Act/Anti-Money Laundering programme at Deutsche Bank conducted by the Federal Reserve Bank of New York identified significant deficiencies in Deutsch Bank’s risk management and compliance with the Bank Secrecy Act/Anti-Money Laundering Requirements that have resulted in a violation of the regulatory compliance program requirement; and
2. Deficiencies in Deutsche Bank’s transaction monitoring capabilities prevented Deutsche Bank from properly assessing Bank Secrecy Act/Anti-Money Launder risk for billions of dollars in potentially suspicious transactions processed between 2011 and 2015 for certain Deutsche Bank affiliates in Europe for which the affiliates failed to provide sufficiently accurate and complete information.
The Fed, in the Order, declared that actions were taken by the Board to address unsafe and unsound practices at the firm’s domestic banking operations. The Board identified failures by Deutsche Bank’s U.S. banking operations to maintain an effective program to comply with the Bank Secrecy Act and anti-money laundering laws.
The Order requires Deutsche Bank to improve its senior management oversight and controls related to compliance by the U.S. banking operations with anti-money laundering laws and those improvements address the following main areas:
- Corporate Government and Management Oversight of Deutsche Bank’s US Operations
- Compliance Risk Management Program for Deutsche Bank’s US Operations
- Deutsche Bank (US) Bank Secrecy Act/Anti-Money Laundering Compliance Review to be conducted by an independent third party
- Deutsche Bank (US) Transaction Review to be conducted by an independent third party
- Deutsche Bank (US) to submit revised Bank Secrecy Act/Anti-Money Laundering Compliance Program
- Deutsche Bank (US) to submit revised Customer Due Diligence Program
- Deutsche Bank to submit Suspicious Activity Monitoring Program sufficient to identify timely, accurate and complete reporting of all known or suspected violations of law or suspicious transactions to law enforcement and supervisory authorities
- Deutsche Bank (US) to submit a written plan for the enhancement of its Transaction Monitoring System.