Deutsche Bank Fails The Money Laundering Test

Deutsche Bank suffered from a “systemic” failure in its internal controls that were set up to stymie money laundering — a discovery that occurred more than two years ago, Bloomberg reported on Thursday (April 14).

The initial “red flags,” as the newswire termed them, began appearing early in 2014, with billions of dollars worth of “suspect trades” coming in from Moscow. But it took another year for the Russian authorities to step in and begin a detailed probe into those transactions.

However, it was Deutsche’s lack of strong internal controls that paved the runway for $10 billion to leave Russia from 2012 to 2014.

The findings were part of an internal report at Deutsche completed and presented in October of last year, looking into and analyzing these “mirror trades,” complemented by details from a Russian central bank audit that also had a fine tied to reporting errors and lapses from Deutsche.

Among the findings from the Deutsche internal audit: Missed warnings stretched from the firm’s Moscow office to compliance and money laundering officials based both in New York and London. Prosecutors in the United States and European regulators are looking into the matter.

The news may not do much to help Deutsche’s stock, which, as Bloomberg noted, is trading for roughly one-third of stated book value. The bank itself said in a statement that since the internal report debuted last year, “we have worked to address these deficiencies, taken disciplinary measures with regards to certain individuals and are fundamentally reviewing our client onboarding and monitoring processes.”

At issue is whether the bank vetted the companies with whom it dealt on a counterparty basis.

The question remains, said the newswire, as to whose money was changing hands, and some commentary suggests crony capitalism (friends of Putin, perhaps?).


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