Deutsche Bank has been fined by both UK and US authorities for failing to implement proper anti-money laundering control frameworks, which resulted in clients illegally moving US$10 billion out of Russia.
Britain’s Financial Conduct Authority (FCA) fined Deutsche Bank US$204 million and the New York Department of Financial Services fined them US$425 million. The authorities cited significant deficits in Deutsche Bank’s global anti-money laundering framework, including inadequate customer due diligence processes and deficient anti-money laundering policies and procedures.
Without sufficient customer information, risk assessment processes and transaction monitoring are ineffective.
As a consequence of these failings, unidentified customers were able to transfer around US$10 billion from Russia to offshore bank accounts using ‘mirror trades’. These trades involved clients purchasing shares in roubles in Moscow then the same stocks were sold through Deutsche Bank’s London branch for US dollars.
Whilst ‘mirror trades’ can be legal, the FCA said that the “covert transfer of those funds out of Russia” and lack of economic purpose was highly suggestive of financial crime. The trades also highlighted the lack of anti-money laundering controls in place at Deutsche Bank.
In imposing the largest penalty for anti-money laundering control failings ever, the FCA highlighted that Deutsche Bank’s actions had exposed the UK and global financial systems to serious risk. As such, the size of the fines is reflective of the seriousness of the anti-money laundering failings.
Criminal investigations by the US Department of Justice and other regulators and law enforcement authorities are ongoing.
This case highlights the complexity of anti-money laundering regulations. GRC Solutions offers an extensive library of online compliance training courses, including Anti-Money Laundering training. Contact us today for more information about our off-the-shelf and customized course offerings.