Deutsche fined $630 mln for failures over Russian money-laundering

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By Karen Freifeld and Arno Schuetze | NEW YORK/FRANKFURT

agreed to pay $630 million in fines to U.S. and UK regulators
for failing to prevent around $10 billion in suspicious trades
being laundered out of Russia, settling a second major legal
case this month.

The scheme involved so-called mirror trades between the
bank’s Moscow, London and New York offices from 2011 to 2015, in
which it bought Russian blue-chip stocks in roubles on behalf of
clients and sold the identical quantity of the same stocks at
the same price through its London branch shortly afterwards.

“The offsetting trades here lacked economic purpose and
could have been used to facilitate money laundering or enable
other illicit conduct,” the New York Department of Financial
Services said, which fined Deutsche Bank $425 million.

“The bank missed numerous opportunities to detect,
investigate and stop the scheme due to extensive compliance
failures, allowing the scheme to continue for years.”

Britain’s Financial Conduct Authority separately fined
Deutsche Bank 163 million pounds ($204 million) for failing to
maintain an adequate anti-money laundering controls between 2012
and 2015, allowing customers to transfer billions from Russia to
offshore bank accounts “in a manner that is highly suggestive of
financial crime”.

It is the largest financial penalty for anti
money-laundering controls failings yet imposed by the FCA or its
predecessor, the Financial Services Authority.

The Russian case settlements, on the heels of a $7.2 billion
agreement with the U.S. Department of Justice earlier this month
over the misselling of mortgage-backed securities, lift much of
the uncertainty swirling around the bank over its exposure to
fines and enforcement.

Deutsche Bank said the Russia-related settlement amounts
were “materially reflected” in existing litigation reserves. It
added, however, it was still cooperating with other regulators
and authorities who had their own ongoing investigations.

Its shares rose 1.5 percent to the top of Germany’s
blue-chip index at 18.88 euros in early trade.

The U.S. Department of Justice, which also has been
investigating the suspicious trades, is not party to the deal. A
spokesman for the department declined to comment on the status
of its probe.

Reuters reported earlier that Deutsche Bank was poised to
settle over the trades.

The New York regulator, which licenses and supervises the
New York branch, found Deutsche Bank conducted its business in
an unsafe and unsound manner in violation of state banking law.

The trade of a Russian blue chip stock, typically valued at
between $2 million to $3 million an order, was cleared through
the bank’s New York operations, with the sellers typically
paying in U.S. dollars, DFS said.

In addition to the penalty, Deutsche is required to retain
an independent monitor to review the bank’s compliance programs.

Deutsche Bank disclosed last September that it had taken
disciplinary measures against certain employees as part of an
investigation of the trades and would continue to do so. It also
cut back on its investment banking activities in Russia.

Monday’s consent order found Deutsche Bank’s Moscow traders
facilitated the scheme, with most of the trades placed by a
single trader representing both sides of the transaction.

Deutsche’s Moscow traders did not question the suspicious
trades because it made for easy commissions when their Russian
business had slowed, the regulator found.

The bank is due to report fourth-quarter financial results
on Thursday.
($1 = 0.8000 pounds)

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