The New York State Department of Financial Services (DFS) and the Financial Conduct Authority (FCA) in the UK have fined Deutsche Bank a combined $630 million for violating anti-money laundering (AML) laws through a mirror-trading scheme.
The DFS found Deutsche Bank had engaged in a long-term mirror-trading scheme on the equities desk at its Moscow branch in Russia.
Certain companies that were clients of the equities desk issued orders to purchase Russian blue chip stock, but a related counterparty in Deutsche Bank’s London branch would then sell the identical stock in the same quantity at the same price.
The counterparties involved were always closely related by common beneficial owners, management or agents.
The FCA said that as a result of Deutsche Banks inadequate approach to AML, the bank's Russian subsidiary, DB Moscow, was used by the unidentified customers to transfer some $10 billion of unknown origin from Russia to offshore bank accounts in a way that was highly suggestive of financial crime.
The DFS said Deutsche Bank had conducted business in an “unsafe and unsound manner, failing to maintain an effective and compliant anti-money laundering program.”
A compliance officer at the bank was contacted by the regulator about contradictory information on a company involved in the trading scheme, but the DFS never received a response.
The senior compliance employee did not take any steps to investigate the inquiry and later explained that the employee had “too many jobs” and “had to deal with many things and had to prioritise.”
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.”