13/12/19

REGULATION: Deutsche Bank €15m Fine for Money Laundering.

As published on internationalinvestment.net, Tuesday December 10, 2019.

Deutsche Bank has settled a case with Frankfurt prosecutors that involved a raid on its offices and resulted in a huge hit on earnings and stock value over suspected money laundering.

German authorities raided Deutsche Bank's offices, including its Frankfurt base, in connection with the probe in 2018. When footage of the raid, which involved about 170 authorities, was released, the bank's shares plummeted to an all-time low. Chief executive officer Christian Sewing would later say that the raids also saw the exodus of many clients who were spooked by the actions, which led to Q4 losses.

The raid looked into alleged misconduct at Deutsche Bank's British Virgin Islands unit Regula. Regula was part of Deutsche Bank's global trust solutions business, which was offloaded to Bank of N.T. Butterfield & Son last year.

"It is true that the bank had weaknesses in its control environment in the past"

The probe concerned two of the bank's employees, who were investigated over German client interactions with offshore entities set up by Regula.

The investigation into these employees has now been dropped due to lack of adequate suspicion. On the contrary, the prosecutor's office will continue its investigation of Regula's German clients suspected of engaging in tax-evasion activities.

The €15m fine imposed reflects the bank's failure of timely reporting of alleged money-laundering issues associated with Regula, lack of intricate supervision and staff shortage in Deutsche Bank's anti-money-laundering team from 2015 through early 2018.

"With the closure of these proceedings it is clear that the prosecutors have not found any instances of criminal misconduct on the part of Deutsche Bank employees following the raid of our Frankfurt office in November 2018," Deutsche Bank spokesperson said in a statement.

"The investigation that has now been closed due to lack of sufficient suspicion had a heavy impact on Deutsche Bank last year," he added. "It is true that the bank had weaknesses in its control environment in the past. We identified these weaknesses and we have addressed them in a disciplined manner," the spokerperson added.

Deutsche Bank has been in the crosshairs of various investigations, both by US and German authorities, over money laundering issues and AML controls.