Deutsche Bank gets £163m fine from the FCA

The German lender is accused of “failing to maintain an adequate anti-money laundering (AML) control framework” from 2012 to 2015.

The penalty is the biggest of its kind.

The FCA said Deutsche Bank exposed the UK financial system to the risks of financial crime by failing to properly oversee the formation of new customer relationships and the booking of global business in the UK.

As a consequence, Deutsche Bank was used by unidentified customers to transfer approximately 10 billion US dollars of unknown origin from Russia to offshore bank accounts in a manner that is “highly suggestive of financial crime”.

Mark Steward, director of enforcement and market oversight at the FCA, said: “Deutsche Bank was obliged to establish and maintain an effective AML control framework.

“By failing to do so, Deutsche Bank put itself at risk of being used to facilitate financial crime and exposed the UK to the risk of financial crime.

“The size of the fine reflects the seriousness of Deutsche Bank’s failings. We have repeatedly told firms how to comply with our AML requirements and the failings of Deutsche Bank are simply unacceptable.

“Other firms should take notice of today’s fine and look again at their own AML procedures to ensure they do not face similar action.”

Among the litany of failings the FCA uncovered at Deutsche Bank’s

corporate banking and securities division were:

:: inadequate customer due diligence;

:: failure to ensure its front office took responsibility for its Know Your Customer obligations;

:: flawed customer and country risk rating methodologies;

:: “deficient” AML policies and procedures;

:: inadequate AML IT infrastructure;

According to the FCA, the failings allowed the front office of Deutsche Bank’s Russia-based subsidiary, DB Moscow, to execute more than 2,400 “mirror trades” used to transfer more than six billion US dollars from Russia using its UK division.

The cash ended up in overseas bank accounts in countries including Cyprus, Estonia, and Latvia.

The transfer of those funds out of Russia is “highly suggestive of financial crime”, the FCA said.

A further 3.8 billion US dollars in suspicious “one-sided trades” also occurred. For its part, Deutsche Bank agreed to settle at an early stage of the FCA’s investigation and therefore qualified for a 30% discount on the fine, which cut the fine down from £229 million.

The FCA said Deutsche Bank was “exceptionally cooperative” during the investigation and has committed “significant resources” to a large scale remediation programme to correct the deficiencies identified.

--