The New York State Department of Financial Services (DFS) and the UK Financial Conduct Authority (FCA) issued massive fines against Deutsche Bank today. The bank has to pay about $628.5 million (£163 million + $425 million) for its failure to prevent a Russian ‘Mirror-Trading’ money laundering scheme.
According to both regulators, Deutsche Bank was used by unidentified clients to transfer approximately $10 billion, of unknown origin, from Russia to offshore bank accounts in a manner that is highly suggestive of financial crime. Deutsche Bank’s Russia-based subsidiary (DB Moscow) executed thousands of pairs of trades that mirrored each other (mirror trades). The mirror trades were used by customers of Deutsche Bank and DB Moscow to transfer billions from Russia, through Deutsche Bank in the UK, to overseas bank accounts, including in Cyprus, Estonia, and Latvia.
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Mark Steward, Director of Enforcement and Market Oversight at the FCA, said: “Financial crime is a risk to the UK financial system. 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.”
“In today’s interconnected financial network, global financial institutions must be ever vigilant in the war against money laundering and other activities that can contribute to cybercrime and international terrorism,” DFS Superintendent Maria T. Vullo added.
“This Russian mirror-trading scheme occurred while the bank was on clear notice of serious and widespread compliance issues dating back a decade. The offsetting trades here lacked economic purpose and could have been used to facilitate money laundering or enable other illicit conduct, and today’s action sends a clear message that DFS will not tolerate such conduct. DFS is pleased to work with the Financial Conduct Authority on this matter. We also appreciate the bank’s forthrightness and timeliness in conducting its internal review and cooperation in our investigation,” she said.