Deutsche Bank Fined $630M Over $10B in Bogus Trades That May Have been Tied to Russian Money Laundering

Deutsche Bank AG will pay UK and US regulators $630M in fines to settle allegations that it did not stop approximately $10B in suspect trades that may have involved laundering money out of Russia. The trades at issue were mirror trades between the German lenders offices in New York, London, and Moscow. They took place between ’11 and ’15.

It was during this time that Russian blue chip stocks were purchased in rubles for clients and sold in the same amount of stocks at the equivalent price through Deutsche Bank’s London office soon after. As a result, reports The Guardian, funds were transferred through the bank to accounts abroad, including in Latvia, Estonia, and Cyprus.

Deutsche Bank is accused of not getting information about customers that took part in the mirror trades. As a result, the bank’s DB Moscow executed over 2400 pairs of mirror trades. Sellers were registered in locations offshore. Shares in Russian companies were paid for in rubles, the sellers were paid in dollars.

Trades of Russian blue chip stocks, usually at $2M-$3M/order are cleared via Deutsche Bank’s operations in NY. The New York Department of Financial Services fined Deutsche Bank $425M. It said that these trades served no “economic purpose” and could have been used for “illicit conduct,” such as money laundering. The state regulator contended that not only did the bank miss several chances to identify, probe, and stop the trading scam, but also because of compliance failures the fraud was able to continue. The ability to earn commissions was one reason cited for why traders may have chosen not to look into the suspect trades.

In Britain, the Financial Conduct Authority fined the bank $204M for not putting into place anti-money laundering controls that were “adequate” during the period at issue and for letting customers move billions of dollars to offshore accounts in a way that was “highly suggestive” of a crime taking place.

The UK’s fine is the largest it has ever imposed for possible money laundering offenses. The European nation’s regulator contended that by not putting in place an anti-money laundering control framework that was “effective,” Deutsche Bank exposed the UK and its financial system to the risk of financial crime. The FCA believes that the mirror trades were conducted to convert the rubles into US dollars and facilitate the “covert transfer” of these monies outside of Russia. Also, according to The Guardian, regulators discovered nearly $3B in 3,400 suspect one-sided trades.

According to the consent order, it was Deutsche Bank traders located in Moscow who were responsible for facilitating the fraud. Deutsche Bank said it has taken disciplinary action against employees as part of its probe into the mirror trades as well as reduced its investment banking activities in Russia. As part of the settlement with regulators, the German lender must hire an independent monitor to assess its compliance programs.

DFS FINES DEUTSCHE BANK $425 MILLION FOR RUSSIAN MIRROR-TRADING SCHEME, New York Department of Financial Services, January 30, 2017

FCA fines Deutsche Bank £163 million for serious anti-money laundering controls failings, FCA, January 31, 2017

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