Deutsche Bank was hit with the largest ever penalty for financial crime on Tuesday when the City regulator fined it in excess of £163m for failing to maintain adequate anti-money laundering controls from 2012 to 2015.
It is the largest fine ever that either the Financial Conduct Authority, or any UK City regulator has imposed on a financial institution for financial crime.
The FCA found that Deutsche Bank put the UK financial system at risk of money laundering by “failing to properly oversee the formation of new customer relationships and the booking of global business in the UK”.
Deutsche Bank was used by unidentified customers to transfer approximately $10bn, of unknown origin, from Russia to offshore bank accounts “in a manner that is highly suggestive of financial crime”.
Mark Steward, director of enforcement and market oversight at the FCA, said: “The size of the fine reflects the seriousness of Deutsche Bank’s failings. We have repeatedly told firms how to comply with our AML 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 AML procedures to ensure they do not face similar action.”
Deutsche Bank failed to carry out adequate customer due diligence, failed to fulfil Know Your Customer obligations, used flawed customer and country risk rating methodologies, among other AML failings.
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.
DB said in a statement: “Deutsche Bank has reached settlements with the UK Financial Conduct Authority and the New York State Department of Financial Services. The settlements conclude the FCA and the DFS’s investigations into the bank’s anti-money laundering control function in its investment banking division, including in relation to certain securities trades that occurred between 2011 and 2015 involving its Moscow, London and New York offices.”