Due dilligence: Deutsche Bank reports show chinks in money laundering armor
06 Aug 2018

Deutsche Bank has uncovered shortcomings in its ability to fully identify clients and the source of their wealth, internal documents seen by Reuters show, more than a year after it was fined nearly $700 million for allowing money laundering.

In two confidential reviews, dated June 5 and July 9, Germany’s biggest lender detailed the results of tests on a sample of investment bank customer files in several countries, including Russia.

Both reviews found gaps in Deutsche’s screening process, which aims to meet so-called “Know Your Customer” (KYC) requirements that are a cornerstone of global anti-money laundering controls.

Regulators around the world require banks to vet customers so that criminals cannot mask their identity through complex company and ownership structures to launder money or sidestep international sanctions.

The two recent reviews show how the bank is still grappling with procedures to ensure it knows who it is dealing with, in part because of staff turnover.

In the 13-page June report, which was shared with the European Central Bank (ECB), Deutsche Bank found a pass rate of zero percent in countries such as Russia, Ireland, Spain, Italy and South Africa when it checked how client files had been processed.

The pass rate measures the percentage of files that meet the bank’s own “Know Your Customer” standards. Deutsche Bank strives for 95 percent, according to the documents.

Hui Chen, a former compliance expert with the U.S. justice department, said that this target was roughly in line with other global banks.

The bank told Reuters that the reviews showed its processes were too complex, but said it was making improvements and that overall controls to prevent crimes such as money laundering were effective.

“We still need to improve in terms of internal processes,” it said, when presented with the findings of the reviews.

“What the documents show is that our internal processes are still too complicated,” it said.

“So it is not about effectiveness, but about the efficiency of our processes.”

– By Edward Taylor, Tom Sims, John O’Donnell, Reuters, 3 August 2018.

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