Internal auditors at Deutsche Bank found weaknesses in anti-money laundering processes resulted in checks and high-value electronic payments being processed without undergoing the proper vetting.
The Financial Times, citing people familiar with the review, reported the lax anti-money laundering and sanctions controls were in place for years. The paper reported that one of the six weaknesses was called a filtering gap that impacted checks written by corporate clients to foreign recipients. Checks may not be as popular as in the past, but The Financial Times noted Deutsche Bank processes around 50,000 each year via its cash management units in the U.K. and Ireland. It’s not clear how many checks got through the weak anti-money laundering processes and how many years it goes back. The bank told The Financial Times that the checks issued are small in scope and only impacted checks that were written by three corporate clients that fell in the low-risk customers bucket because they were strong companies in developed countries. In 2018 under 100 checks were impacted but the internal auditors aren’t sure how many got through before 2018.
In addition to the check issues, Deutsche Bank is looking into other “critical” and “significant” failings found by auditors, including client due-diligence name list screening practices in Hong Kong, Singapore and India, and staff sending sensitive information over WhatsApp or personal emails. The paper reported the auditor team warned executives at the bank that the shortfalls in compliance could mean Deutsche Bank isn’t completely compliant with the MLD4 anti-money laundering rule introduced in 2018 by the European Union.
“We carried out a regularly scheduled audit into our check processing processes, which was completed last year and did not identify any AML or sanctions breaches,” Deutsche Bank said in a statement to the FT. “We have invested substantially in our IT and anti-financial crime capabilities.” The bank said it improved its Swift IT system and fixed eight of the 11 major issues laid out in the report. It also rolled out a so-called “four years rule” in which two people have to check high-value payments. Deutsche Bank has already paid millions in fines for failing to comply with money laundering directives, noted the report.