Deutsche Bank is facing a major escalation of a US probe into its activities in Russia, as a money laundering investigation of its Moscow unit widens to examine possible sanctions violations, said people familiar with the case.
The US Department of Justice and New York’s Department of Financial Services are expanding the scope of their probe into the bank because some of the scrutinized transactions allegedly involved US dollars and a former banker who is a US citizen, Yahoo reported.
The probe is one of the first known US investigations of a Wall Street company tied to potential breaches of western sanctions against Russia since the measures were first imposed in the wake of Russia’s 2014 annexation of Crimea.
At issue is a series of so-called “mirror trades”, in which Russian clients bought securities in rubles through Deutsche Bank’s Moscow office and then sold identical ones for foreign currency, including US dollars, through the bank’s London office. Some of the transactions also involved US dollar clearing.
The DoJ and DFS are investigating $6 billion-worth of such trades, people familiar with the case said.
A central focus of the US inquiry is Tim Wiswell, a US citizen who was head of Deutsche’s Russian equities desk and was placed on leave in connection with the internal inquiry, the people said.
US authorities are also examining whether Deutsche had adequate compliance programs in place in relation to Russian sanctions and provided accurate information to regulators.
Some of the bank’s Russian clients subject to US sanctions included the brothers Arkady and Boris Rotenberg, who are close associates of Russian President Vladimir Putin.
US sanctions imposed on Russian entities and individuals make it difficult for US citizens and companies to do business with them, particularly if the transactions involve US dollars.
US authorities are also exploring whether trades allowed Deutsche Bank’s Russian clients to illegally move funds out of the country.
Given Wiswell’s senior position at Deutsche, US authorities are also investigating whether his alleged involvement indicates that a broader scheme was approved by executives at the bank, people familiar with the case said. Wiswell has sued the bank for wrongful dismissal.
In April this year, Deutsche Bank, Germany’s biggest lender, had been fined $2.5 billion by US and UK regulators for manipulating market key rates including Libor, the benchmark for interest rates on trillions of dollars of financial contracts, RT reported.
The bank admitted settlement that its employees rigged the yen Libor (London Interbank Offered Rate) and the Brussels and Tokyo equivalents, Euribor and Tibor, to benefit their trading book and those of traders at other banks.
This was the biggest fine in a Libor case to date.
