Security & Fraud

Watchdog Orders Deutsche Bank To Review Policies Post-AML Scandal

Watchdog Orders Deutsche To Review Policies

Bafin, the German financial watchdog that is monitoring Deutsche Bank’s involvement in the Danske Bank money laundering scandal, has asked the bank to review some of its correspondent banking policies, according to a report from Reuters.

Deutsche Bank served as a correspondent bank for Danske Bank, and helped to move funds from Estonia to places like the United States. Bafin has widened the mandate of its special representative covering the bank, who was appointed in September of 2018. The watchdog is asking Deutsche Bank to review its group-wide processes in terms of managing correspondent banking, and to adjust them if necessary.

Deutsche Bank, for its part, said there was no malfeasance on its end. Bafin is not the only organization that is issuing mandates to the bank, as law enforcement agencies and the U.S. Federal Reserve are also involved in investigations.

The crux of the inquiries revolves around what authorities deem to be suspicious payments of 200 billion euros ($225 billion) from 2007 to 2015 from Danske Bank’s Estonia location.

Since the scandal, Deutsche Bank has taken steps to shrink its correspondent business by about 40 percent since 2016. It has cut activity in Russia by 75 percent and has left businesses in Latvia, Estonia and Moldova.

The Fed fined Deutsche Bank almost $700 million in 2017 for having weak controls and allowing money laundering from Russia.

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 of 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 many 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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