Regulation

Deutsche Shrinks Correspondent Banking Post-Danske AML Scandal

Deutsche Shrinks Correspondent Banking Post AML Danske Scandal

In the wake of an investigation of over 200 billion euros ($229 billion) in suspected money laundering at Danske Bank’s Estonia branch, Deutsche Bank has said it has sharply cut down on its correspondent banking services, according to a report by Reuters.

Stephan Wilken, the bank’s head of anti-financial crime and anti-money laundering, said the bank’s worldwide correspondent portfolio is about 40 percent smaller than it was in 2016. Speaking to a committee of the European Parliament, Wilken said the bank’s portfolio of potentially high risk correspondent banking customers is 60 percent less than it was in 2016, as well.

The 200 billion euros were moved from 2007 to 2015. Deutsche said it acted as a correspondent bank for Danske Bank in Estonia, and that it helped to transfer funds for the bank from Estonia to other places around the world, like New York.

Deutsche Bank said it didn’t know about any malfeasance in terms of the transactions, and that it’s cooperating with authorities during the investigation.

Wilken also told parliament that Deutsche Bank also cut down active correspondent banking ties in Russia by about 75 percent since 2016, and it has stopped doing business in Moldova, Estonia and Latvia.

In other Deutsche Bank news, German regulators recently said they were prepared to support a merger of Deutsche Bank and Commerzbank to create one banking giant.

The move is an acknowledgment about the health of the two banks as standalone entities. A senior regulator said that he had looked over the plan and unofficially backed the idea of merging the two banks. German Finance Minister Olaf Scholz and the Social Democratic Party have been pushing for the merger.

“This is a decision about industrial policy and it has to be made by politicians,” the regulator said, adding that Chancellor Angela Merkel’s conservatives are also backing the idea of a merger.

One person close to Cerberus Capital Management, the investment firm that owns a lot of shares in both banks, said the executives wouldn’t block a deal if it got the blessing of the German government. 

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