Deutsche Bank has “serious” and “systemic” failings in its controls against money laundering, terrorist financing and sanctions, according to confidential findings by the UK’s financial watchdog, which had already put the lender in supervisory “special measures”.
The Financial Conduct Authority conducted an in-depth review last year that found a catalogue of shortcomings at the bank, ranging from missing documents and a lack of transaction monitoring to inappropriate pressure put on staff to take on certain clients. The watchdog has now ordered a separate independent review, according to a recent letter sent by the FCA to Deutsche, CNBC reported.
“Our overall conclusion was that Deutsche Bank UK had serious anti-money laundering, terrorist financing and sanctions failings which were systemic in nature,” said the FCA’s letter, dated March 2. “Effective senior management engagement and leadership on financial crime had been lacking for a considerable period of time.”
The FCA’s findings are another blow to Germany’s biggest lender, which has been beset by misconduct issues including the rigging of Libor and is subject to an investigation into $10 billion of suspicious Russian trade. Last week, the Frankfurt-based company was caught up in a storm after one of its board members resigned following a clash over how to deal with past scandals.
Lengthy Procedures
In the wake of its review across Deutsche’s offices in the UK, India and Dublin, the FCA has ordered a so-called skilled persons report—sometimes known as a Section 166 report—to assess remedial work Deutsche must now carry out. These reports typically take many months to complete. Their findings can then spark an FCA enforcement investigation, which also normally take months before any conclusions and penalties are published.
Deustche said: “We understand the importance of this issue and are committed to and engaged in fixing it.”
The watchdog’s letter also pointed to Deutsche having “voluntarily agreed” not to take on new high-risk clients as a result of the findings. Cracking down on financial crime—and institutions that facilitate or turn a blind eye to it—is a priority for the FCA, particularly in the wake of the Panama Papers scandal.
In recent years, authorities around the world have tackled banks’ lax controls against such crimes, with US authorities levying financial penalties against HSBC, Standard Chartered and others.
The FCA’s conclusions come after Deutsche’s participation in the watchdog’s anti-money laundering program, which is testing 14 major banks’ controls against financial crime, one lender at a time. It is a program overseen by the FCA’s supervision rather than enforcement team, meaning any remedies ordered are usually not made public.
