15 Oct 2019
Deutsche Bank has confirmed it is pulling the plug on its correspondent banking services to local financial institutions, making it more difficult for them to offer dollar-denominated transactions.
The decision follows on from a hard-hitting assessment by the Council of Europe’s anti-money laundering body about Malta’s failure to adequately combat financial crime.
It is understood the bank will stop offering correspondent banking services in all currencies by the end of December.
A senior banking source with knowledge of the whole sector said most of the banks impacted by the withdrawal will have a second correspondent bank as a contingency.
Deutsche Bank has come under intense regulatory scrutiny across the globe over its processing of dirty money, some of which came about as a result of its correspondent banking relationships.
A Deutsche Bank official told the European Parliament in February that the bank had sharply scaled back its role as a correspondent bank.
In parallel with these Deutsche Bank scandals, Malta has, over the past few years in particular, gained a reputation as a high-risk jurisdiction.
A spokesman for Deutsche Bank told Times of Malta that Deutsche Bank reviews its correspondent banking relationships on a regular basis.
He said the bank factors into consideration, among other things, the cost aspects of a potential correspondent banking relationship and the bank’s overall country coverage strategy.
Correspondent banks like Deutsche Bank help domestic banks access foreign financial markets and conduct transactions in other countries, particularly in dollars.
The dollar is widely viewed as a ‘world currency’ and is essential to international trade.
Deutsche Banks’ decision is expected to mainly impact smaller banks, as neither Bank of Valletta (BOV) nor HSBC rely on the German bank to clear their dollar transactions.
Times of Malta is informed that the announcement was communicated to local banks and authorities during meetings held in Malta earlier this month.
No formal announcement about Deutsche Bank’s decision to withdraw from Malta was made by the government or the Malta Financial Services Authority.
The Deutsche Bank spokesman said over the last three years, the bank has reviewed correspondent banking relationships in many smaller countries in Europe, Asia, Africa and South America.
“Going forward, the bank will focus more on those countries which are key to the bank’s core client base,” the spokesman concluded.
By Jacob Borg, Times of Malta, 12 October 2019
Read more at Times of Malta
RiskScreen: Eliminating Financial Crime with Smart Technology
Count this content towards your CPD minutes, by signing up to our CPD WalletFREE CPD Wallet