Deutsche Bank fined £163m for money laundering failings
Deutsche Bank has been fined £163m by the Financial Conduct Authority (FCA) for failings in its anti-money laundering control framework.
This is the largest financial penalty for AML controls failings ever imposed by the FCA, or its predecessor the Financial Services Authority (FSA).
The regulator said its failings, between January 2012 and December 2015, meant Deutsche Bank was used by unidentified customers to transfer around $10bn, of unknown origin, from Russia to offshore bank accounts which is “highly suggestive of financial crime”.
Following an FCA investigation, Deutsche Bank’s corporate banking and securities division in the UK was found to have lacked automated systems for detecting suspicious trades.
It was also found to have used flawed customer and country risk rating methodologies and failed to provide adequate oversight of trades booked in the UK by traders in non-UK jurisdictions.
The FCA said these failings allowed the front office of Deutsche Bank’s Russia-based subsidiary (DB Moscow) to execute more than 2,400 pairs of mirror trades between April 2012 and October 2014.
Mirror trades are a form of automated trading that implements fixed strategies based on a trader’s preferences.
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 FCA said a further $3.8bn in suspicious “one-sided trades” also occurred.
It said: “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.”
Deutsche Bank agreed to settle at an early stage of the FCA’s investigation and therefore qualified for a 30 percent discount, if the bank had not done this the fine would have been nearly £230m.
Mark Steward, director of enforcement and market oversight at the FCA, said: “Financial crime is a risk to the UK financial system. Deutsche Bank was obliged to establish and maintain an effective AML 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 FCA said Deutsche Bank has committed significant resources to a large scale remediation programme to correct the deficiencies in its AML control framework and customer files.