A software glitch that was in effect for almost a decade prevented Deutsche Bank from detecting potentially suspicious transactions that would be flagged for authorities.
The news comes after reports surfaced earlier this week that Deutsche decided to not report potentially suspicious transactions on the accounts of Donald Trump and his son-in-law Jared Kushner in 2016 and 2017. It also comes the day before a shareholders meeting, where some investors will reportedly call for the ousting of the bank’s Chairman Paul Achleitner.
As for the software glitch, a Deutsche spokesman said one of the bank’s several anti-financial crime systems was affected. The software, which was put in place around 2010, was supposed to look for suspicious patterns of payments processed by its corporate and investment banking clients.
“Two of 121 parameters [of the IT application] were defined incorrectly,” said the bank, according to Financial Times. “Deutsche Bank is working on correcting the error as quickly as possible, and is in close contact with the regulators.”
The company revealed that the issue was discovered by the bank’s anti-financial crime unit last fall. A person familiar with the matter said the lender is still trying to figure out how many suspicious transactions were not flagged to authorities.
Hermes EOS, an investment advisor, warned that while Deutsche had improved its control and compliance functions, there has not been “enough focus and investment in this area.” Roland Bosch, sector lead for financial services at Hermes EOS, said that “more needs to be done to ensure that Deutsche Bank finally gets to grip with historic issues, and can demonstrate that it has put in place effective controls and compliance management.”
In the meantime, Deutsche’s Chief Regulatory Officer Sylvie Matherat will probably be replaced over the coming months, with one source saying it “is just a question of when, rather than if” she will be dismissed.