Deutsche Bank Fined $150 Million Over Epstein Red Flags
09 Jul 2020

When Deutsche Bank AG sought out Jeffrey Epstein as a client, he was a convicted Florida sex offender with a publicized taste for young eastern European women.

The bank helped him send millions of dollars to his alleged co-conspirators. It handled transfers to women with Russian bank accounts. And it didn’t fuss when the financier’s personal lawyer asked how much cash he could withdraw without drawing attention — after which the lawyer showed up scores of times to collect the maximum, $7,500 per trip.

With these and other efforts to keep the late financier’s money flowing over a half-decade beginning in 2013, Deutsche Bank ignored the possibility that the financier was using the money to support a continuation of his criminal activity, New York’s financial regulator said Tuesday. In addition to ignoring warning signs on Epstein, the Department of Financial Services said the bank failed to properly oversee its correspondent banking relationships with two institutions deeply embroiled in global money laundering scandals, FBME Bank Ltd. and Danske Bank A/S.

“Deutsche Bank failed to adequately monitor the activity of customers that the bank itself deemed to be high risk,” DFS Superintendent Linda Lacewell said in a written statement. “In the case of Jeffrey Epstein in particular, despite knowing Mr. Epstein’s terrible criminal history, the bank inexcusably failed to detect or prevent millions of dollars of suspicious transactions.”

Epstein’s victims may be emboldened by the DFS’s action in their efforts to seek accountability and compensation from his estate. Deutsche Bank, which was fined $150 million, signed off on a consent order outlining details of the compliance lapses. The victims also could be looking for new information to arise from the arrest last week of Ghislaine Maxwell, a longtime Epstein associate who’s accused of recruiting minors who were then sexually assaulted.

Deutsche Bank said it deeply regrets its association with Epstein and said it had cooperated with U.S. authorities. “We acknowledge our error of onboarding Epstein in 2013 and the weaknesses in our processes, and have learnt from our mistakes and shortcomings,” said Daniel Hunter, a spokesman for the bank. He added that the bank had spent almost $1 billion to improve its anti-money-laundering controls.

According to the consent order, after Epstein’s relationship manager at one major bank moved to Deutsche Bank in late 2012, the manager encouraged top executives at Deutsche Bank’s wealth management Americas unit to recruit Epstein as a client. The relationship manager promised that Epstein could generate as much as $100 million to $300 million in “flow,” as well as $2 million to $4 million in annual revenue over time.

The regulator didn’t identify Epstein’s previous bank. He was a longtime client of JPMorgan Chase & Co.’s private bank, which severed the relationship around that time, after Epstein’s Florida conviction. JPMorgan declined to comment.

‘Butterfly Trust’

Although a client coordinator at the bank laid out Epstein’s criminal history in a memo, bank executives, including some working in compliance, signed off on adding him as a client. They allowed him to shield his identity by keeping his funds in a variety of entities that didn’t bear his name.

Soon after moving his funds to Deutsche Bank, Epstein began sending out payments of more than $10,000 to individuals who had been identified in news accounts as his co-conspirators. Many of the payments came out of an entity created by Epstein called the “Butterfly Trust.”

The Epstein associates aren’t identified in the New York filing. Maxwell is alleged in numerous media accounts to have been Epstein’s primary facilitator.

Over time, according to the New York regulator, Epstein paid out $2.65 million to his co-conspirators as well as various “women with Eastern European surnames,” ostensibly for hotel expenses, schooling and rent. When a bank compliance officer raised concerns about a transfer to one of the Russian bank accounts, an Epstein accountant characterized it as a tuition payment.

Epstein also paid out $7 million in apparent legal settlements and another $6 million to pay his own legal expenses and those of his co-conspirators, the regulator said.

The consent order also describes a series of withdrawals by Epstein’s personal lawyer, who became a fixture at the bank’s Park Avenue branch in Manhattan. The regulator doesn’t identify the attorney. But his description matches that of Darren Indyke, who served as Epstein’s personal lawyer for many years and became co-executor of his estate following his death last August. Indyke didn’t respond to requests for comment.

On one occasion, in May 2014, the lawyer asked bankers “how often they could come in to withdraw cash without creating some sort of alert,” according to the regulator, which recounts the line of questioning: “Is it once a week? Twice a week? Once every other week?”

By law, banks are required to flag certain cash withdrawals to regulators — those of $10,000 or more per day for individual account holders. According to DFS, Deutsche Bank sets a $7,500 limit for third party withdrawals. The bank, for its part, told the regulator that it has no record of if or how it responded to the lawyer’s question about reporting requirements.

The lawyer began arriving at the branch two or three times a month — about 100 times over the years — withdrawing $7,500 each time.

By Greg Farrell and Christian Berthelsen, Bloomberg, 7 July 2020

Read more at Bloomberg

RiskScreen: Eliminating Financial Crime with Smart Technology

You can claim CPD minutes for this content, by signing up to our CPD Wallet