bank

July 19, 2023

Deutsche Bank faced the consequence of its sluggish response to address issues concerning money-laundering controls, as the Federal Reserve slapped a hefty $186 million fine on the financial institution. The Fed expressed its dissatisfaction with Deutsche Bank’s lack of progress in complying with the orders issued in 2015 and 2017, which the bank had previously agreed to.

In addition to the fine, the Federal Reserve issued a fresh order mandating Deutsche Bank to prioritize the completion of the controls it was supposed to have established earlier. While some improvements were noted, the central bank deemed the institution still exposed to significant compliance risks, particularly in detecting money laundering and violations of U.S. sanctions.

Deutsche Bank responded to the fine, acknowledging their historical delay in adhering to previous enforcement actions and agreements. They emphasized their efforts in enhancing money-laundering controls by expanding their team responsible for tackling financial crimes.

However, Deutsche Bank’s track record with regulators and prosecutors has been troubled over the past decade, facing sanctions and substantial fines for failing to address money laundering issues, as well as allegations of tax violations, price fixing, and foreign bribery. Notably, in 2017, the bank reached a $7.2 billion civil settlement with federal prosecutors for selling toxic mortgage products before the 2008 financial crisis. Furthermore, the bank was fined $150 million by a New York bank regulator in 2020, partly due to its association with the disgraced financier Jeffrey Epstein.

The root cause of the Fed’s orders from 2015 and 2017 originated from Deutsche Bank’s dealings with Danske Bank’s Estonian branch, which also found itself in trouble with the authorities. Bank regulators discovered inadequate monitoring of transactions involving high-risk customers during their interactions with Danske Bank. Consequently, Deutsche Bank ceased its business relationship with Danske’s Estonian branch in 2015.

Last year, Danske Bank, Denmark’s largest bank, pleaded guilty and agreed to pay a $2 billion penalty following an extensive money-laundering investigation.

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