Deutsche Bank may have retreated from the UK insurance market last year with its
sale of Abbey Life to Phoenix Group for £935 million – but that hasn’t stopped it falling foul of the regulators.
The Financial Conduct Authority (FCA) revealed earlier today that it was fining Deutsche Bank £163,076,224 in what has been described as the “largest financial penalty” for anti-money laundering (AML) failings ever imposed by the FCA or indeed its predecessor, the FSA.
According to a statement announcing the penalty, Deutsche Bank “exposed the UK financial system to the risks of financial crime by failing to properly oversee the formation of new customer relationships.” It states that due to an “inadequate” control framework, the bank was used by unidentified customers to transfer approximately $10 billion from Russia to offshore bank accounts in a manner “highly suggestive of financial crime.”
“Financial crime is a risk to the UK financial system,” said Mark Steward, director of enforcement and market oversight at the FCA. “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.
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“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.”
Among the failings highlighted were “inadequate customer due diligence”, “flawed customer and country risk rating methodologies” and “inadequate anti-money laundering IT infrastructure.”
The failings reportedly allowed the front office of Deutsche Bank’s Russia-based subsidiary (DB Moscow) to execute more than 2,400 pairs of trades that mirrored each other (mirror trades) between April 2012 and October 2014. These trades were used by customers of Deutsche Bank and DB Moscow to transfer more than $6 billion from Russia, through Deutsche Bank in the UK, to overseas bank accounts, including in Cyprus, Estonia, and Latvia.
A further $3.8 billion in suspicious “one-sided trades” also occurred. The FCA believes that some, if not all, of an additional 3,400 trades formed one side of mirror trades and were often conducted by the same customers involved in the mirror trading.
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