03 Mar 2020
Bank of England officials have voiced concerns that Deutsche Bank is failing to improve its anti-money laundering (AML) and compliance controls and have warned the German lender that it could lose access to the UK market following Brexit, the Financial Times reported Monday.
The bank’s latest compliance troubles come four years after it was first censured by British regulators and placed under special supervision by the Financial Conduct Authority (FCA) for “serious” and “systemic” violations tied to its AML, terrorist financing and sanctions controls, according to the news agency.
Going forward, Deutsche Bank must now update the financial regulator on its compliance efforts on a monthly basis rather than at its normal quarterly meetings, the FT said, citing individuals with knowledge of the matter.
Regulators have also told the lender that the post-Brexit reauthorisation of EU “passporting rights” could be delayed should it not take steps to improve its compliance controls, according to FT sources, who also noted that such a punitive measure remains unlikely. The reauthorisation reviews are slated to be completed by December 31, at the end of the Brexit transition period.
The increased pressure on the bank comes on the heels of fresh compliance and systems blunders, including missteps as recent as this year, according to the report.
Last month, Deutsche Bank inadvertently sent data on approximately 12,500 transactions for 500 clients to Amazon, one of the institution’s largest corporate customers, the newspaper reported. Delays in reporting the breach to regulators and affected customers raised concerns that the bank had breached FCA principle 11, which requires covered businesses to be “open and cooperative” with regulatory officials, including by disclosing “anything relating to the firm of which that regulator would reasonably expect notice”.
Sources cited by the Financial Times disclosed separate IT systems failings that occurred two weeks ago and barred Deutsche from access to the UK’s high-value payments system, known as CHAPS, for three hours in the middle of the day. A bank spokesperson told the newspaper that all of the affected payments were processed later that day.
The Bank of England’s Prudential Regulation Authority and the Financial Conduct Authority have been actively monitoring the German lender’s compliance efforts since 2015 and have kept it under special supervision since 2016, the FT said.
Deutsche Bank has also found itself under more scrutiny in Germany, where the financial watchdog BaFin has launched a special audit into the financial institution’s compliance with reporting requirements and rules of conduct, the FT said. In January, the Bonn-based supervisor published a tender for an investigation into an unnamed “internationally operating lender,” which FT sources say is Deutsche.
The review is slated to cost €300,000 and run more than two months, with an application deadline of March 2016, according to the report.
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