21 Jun 2019
US officials are investigating Deutsche Bank’s compliance with anti-money laundering (AML) laws following allegations that the lender declined to report suspect payments tied to wealthy clients, The New York Times said Wednesday.
The investigation stems from an inquiry into whether the German institution facilitated Russian money laundering, including through interbank payments linked to a €200-billion money laundering scandal at Danske Bank, but federal officials have since expanded the scope of the probe to examine the lender’s reporting of suspicious transactions and other potential misconduct, the newspaper said.
Last month, The New York Times outlined allegations by current and former Deutsche employees that senior-level executives at the institution intentionally blocked the filing of suspicious activity reports (SARs) involving President Donald Trump, his son-in-law Jared Kushner’s business and offshore parties, including wealthy Russians.
Investigators with the FBI, the Justice Department’s Money Laundering and Asset Recovery Section and US attorney’s offices in Manhattan and Brooklyn are now examining how the German lender handles its SAR-filing obligations, including its decisions not to report payments made by Kushner Companies to parties in Russia, according to the report.
The criminal probe comes as part of a broader effort by American officials to determine how dirty money enters the US financial system, according to the newspaper, which cited five unnamed sources familiar with the matter. Several other banks are facing similar scrutiny as part of that effort, the report said.
The US Justice Department has been investigating Deutsche Bank since 2015 in relation to its role in the laundering of billions of dollars for well-heeled Russians through a mirror-trading scheme conducted in Moscow.
A Deutsche Bank spokesperson told The Times that it was cooperating with government investigations and has been bolstering its AML systems.
FBI officials investigating the matter recently contacted Tammy McFadden, a former anti-money laundering compliance officer for the bank who claims she was wrongly terminated after voicing concerns that the institution’s controls to prevent financial crime were ineffective, The Times said.
The news outlet reported in May that Deutsche Bank’s transaction monitoring software flagged a series of suspicious payments from Kushner Companies to unnamed Russian individuals. Although McFadden drafted a SAR on the transactions, executives with the lender’s private banking arm in New York ultimately declined to file the report with the US Financial Crimes Enforcement Network (FinCEN), McFadden and other sources told the NYT.
Following Trump’s inauguration in January 2017, employees within Deutsche Bank’s Jacksonville, FL-based Special Investigations Unit produced multiple draft SARs citing “different entities that Mr. Trump owned or controlled,” including limited liability companies and the now-defunct Donald J. Trump Foundation, the newspaper reported last month.
Bank executives again chose not to send the draft reports to FinCEN, according to three former employees who spoke to the newspaper.
Deutsche Bank has repeatedly denied allegations that the SARs were unduly blocked. It’s unclear whether the FBI is examining the 2017 transactions, the NYT said Wednesday.
The deceased banker
FBI agents have also questioned the son of a deceased Deutsche executive, William S. Broeksmit, who served on the oversight board of Deutsche Bank Trust Company Americas until his retirement in 2013, the NYT said.
Less than a year after leaving the bank, Broeksmit committed suicide in his London home after complaining that he was anxious about investigations into the bank, The Wall Street Journal reported in 2014. A Deutsche spokesman said at the time that Broeksmit “was not under suspicion of wrongdoing in any matter,” according to the WSJ.
The son, Val Broeksmit, told the NYT that he had given FBI agents bank records and other material obtained from his father’s personal email accounts.
The Federal Reserve Board singled out Deutsche Bank Trust Company Americas in 2005 and 2015 for AML violations, imposing a $41 million monetary penalty as part of its most recent enforcement action, which also targeted the institution’s New York branch, its US holding company and the bank’s headquarters in Frankfurt, Germany.
In 2017, the New York State Department of Financial Services fined Deutsche Bank Trust Company Americas and other arms of the bank $200 million for sanctions violations.
News of the investigation follows a string of problematic developments for Deutsche Bank, which is looking to downsize its investment banking operations in light of declining profits.
Earlier this month, the lender admitted to the discovery of an array of gaps in its AML controls that went undetected for years, including in its system to monitor cheques and high-value electronic payments. Concerned about regulatory scrutiny, the bank informed nearly 1,000 blue-chip corporate clients that their banking services would be terminated by the end of June if they do not verify their identities.
Democratic lawmakers, who subpoenaed records on Deutsche’s services for Trump earlier this year, called on the head of FinCEN and US Treasury Secretary Steven Mnuchin last month to investigate the SAR-related allegations first reported by The Times.
German prosecutors have separately expanded an investigation into a purported tax-stripping scheme and consider around 70 current and former Deutsche executives as suspects in the probe, Sueddeutsche Zeitung reported in June.
The bank is also grappling with executive turnover and attrition as it mulls naming its fourth CEO in less than four years, The Wall Street Journal said Wednesday.
You can claim CPD minutes for reading this article, by signing up to our CPD WalletFREE CPD Wallet