Deutsche Bank hit with $258m transactions fine
06 November 2015 New York
Image: Shutterstock
Deutsche Bank has been fined a total of $258 million for processing US-denominated transactions on behalf of countries and other entities subject to sanctions under US federal law.
The bank will pay $58 million to the Federal Reserve, which has also issued a cease and desist order, and $200 million to the New York Department of Financial Services (NYDFS), which also ruled that Deutsche Bank must install an independent monitor.
Although many of the staff involved no longer work with the bank, both bodies also ordered that the six that remain with the bank have their employment terminated, and prohibited Deutsche Bank from re-hiring them, or employing them as contractors or consultants. Three additional employees will also be banned from any involvement with US operations.
According to NYDFS, between at least 1999 and 2006, Deutsche Bank deliberately created a payment processing scheme designed to evade the US Treasury Office of Foreign Asset Control (OFAC) sanctions, calling the scheme “OFAC-safe”.
The report cited an email from a Deutsche Bank employee, saying: “Let’s not revert to the client in writing due to the reputational risk involved if the e-mail goes to wrong places. Someone should call [the client] and tell them orally and ensure that the conversation is not taped … Let’s also keep this email strictly on a need-know basis, no need to spread the news … what we do under OFAC scenarios”
The bank used this scheme to process transactions on behalf of countries and other entities subject to US sanctions, including Iran, Libya, Syria, Burma, and Sudan. It conducted about 27,000 transactions denominated in the US dollar, totalling a value of over $10.86 billion.
Deutsche Bank charged additional fees for the clients it was processing transactions for, who were instructed to use code words that would trigger the special treatment, and were instructed not to use the bank’s name. There was also an internal focus on keeping this practice hidden in order to maintain the bank’s reputation.
The $50 million fine from the Federal Reserve related to general unsafe and unsound practices at Deutsche Bank. According to the Federal Reserve, the bank did not have the sufficient policies and procedures in place to make sure its activities outside of the US complied with US sanctions laws.
It also didn't have the correct policies to ensure that these activities were reported to the Federal Reserve Bank of New York in a timely manner.
Anthony Albanese, acting superintendent of NYDFS, said: “We are committed to investigating and pursuing sanctions violations and money laundering at financial institutions.”
“We are pleased that Deutsche Bank worked with us to resolve this matter and take action against individual employees who engaged in misconduct. To truly deter future wrongdoing, it is important to focus not just on corporate accountability, but also individual accountability.”
Deutsche Bank will now implement an enhanced programme to ensure global compliance with US sanctions, which will be administered by the US Department of Treasury Office of Foreign Assets Control.
The employees that have been removed from the firm include senior figures in the global transaction banking, operations, and corporate banking and securities departments, as well as a vice president and relationship manager.
Deutsche Bank agreed to cooperate in the investigation against these individuals, but the Federal Reserve stressed that the bank is not the subject of these investigations.
In a statement, Deutsche Bank said: "We are pleased to have reached a resolution with the New York Department of Financial Services and the Federal Reserve. The conduct ceased several years ago, and since then we have terminated all business with parties from the countries involved."
The bank will pay $58 million to the Federal Reserve, which has also issued a cease and desist order, and $200 million to the New York Department of Financial Services (NYDFS), which also ruled that Deutsche Bank must install an independent monitor.
Although many of the staff involved no longer work with the bank, both bodies also ordered that the six that remain with the bank have their employment terminated, and prohibited Deutsche Bank from re-hiring them, or employing them as contractors or consultants. Three additional employees will also be banned from any involvement with US operations.
According to NYDFS, between at least 1999 and 2006, Deutsche Bank deliberately created a payment processing scheme designed to evade the US Treasury Office of Foreign Asset Control (OFAC) sanctions, calling the scheme “OFAC-safe”.
The report cited an email from a Deutsche Bank employee, saying: “Let’s not revert to the client in writing due to the reputational risk involved if the e-mail goes to wrong places. Someone should call [the client] and tell them orally and ensure that the conversation is not taped … Let’s also keep this email strictly on a need-know basis, no need to spread the news … what we do under OFAC scenarios”
The bank used this scheme to process transactions on behalf of countries and other entities subject to US sanctions, including Iran, Libya, Syria, Burma, and Sudan. It conducted about 27,000 transactions denominated in the US dollar, totalling a value of over $10.86 billion.
Deutsche Bank charged additional fees for the clients it was processing transactions for, who were instructed to use code words that would trigger the special treatment, and were instructed not to use the bank’s name. There was also an internal focus on keeping this practice hidden in order to maintain the bank’s reputation.
The $50 million fine from the Federal Reserve related to general unsafe and unsound practices at Deutsche Bank. According to the Federal Reserve, the bank did not have the sufficient policies and procedures in place to make sure its activities outside of the US complied with US sanctions laws.
It also didn't have the correct policies to ensure that these activities were reported to the Federal Reserve Bank of New York in a timely manner.
Anthony Albanese, acting superintendent of NYDFS, said: “We are committed to investigating and pursuing sanctions violations and money laundering at financial institutions.”
“We are pleased that Deutsche Bank worked with us to resolve this matter and take action against individual employees who engaged in misconduct. To truly deter future wrongdoing, it is important to focus not just on corporate accountability, but also individual accountability.”
Deutsche Bank will now implement an enhanced programme to ensure global compliance with US sanctions, which will be administered by the US Department of Treasury Office of Foreign Assets Control.
The employees that have been removed from the firm include senior figures in the global transaction banking, operations, and corporate banking and securities departments, as well as a vice president and relationship manager.
Deutsche Bank agreed to cooperate in the investigation against these individuals, but the Federal Reserve stressed that the bank is not the subject of these investigations.
In a statement, Deutsche Bank said: "We are pleased to have reached a resolution with the New York Department of Financial Services and the Federal Reserve. The conduct ceased several years ago, and since then we have terminated all business with parties from the countries involved."
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