DEUTSCHE Bank AG has agreed to pay $US425 million ($F881m) to New York’s banking regulator over a “mirror trading” scheme that moved $US10 billion ($F20b) out of Russia between 2011 and 2015, the regulator said on Monday.
In addition, Britain’s Financial Conduct Authority is about to penalise the bank about $US200m ($F414m) for the suspicious trades, a person familiar with the matter said.
The scheme involved clients buying stocks in Moscow in rubles and related parties selling the same stocks shortly thereafter through the bank’s London branch, the New York Department of Financial Services (DFS) said in a statement.
The trade of a Russian blue chip stock, typically valued at between $US2m ($F4m) to $US3m ($F6m) an order, was cleared through the bank’s New York operations, with the sellers typically paid in US dollars, DFS said.
The regulator, which licenses and supervises the New York branch, found the bank conducted its business in an unsafe and unsound manner in violation of state banking law.
Though the trades appeared to have no legitimate economic purpose, Deutsche’s deficient anti-money laundering controls and know-your-customer policies did not detect and stop the scheme for years, DFS superintendent Maria Vullo said.
Deutsche Bank said “it has been unable to identify the actual purpose behind this scheme,” according to a consent order between the New York regulator and the bank.
“It is obvious, though, that the scheme could have facilitated capital flight, tax evasion or other potentially illegal objectives.”
In addition to the penalty, Deutsche is required to retain an independent monitor to review the bank’s compliance programs.
Deutsche Bank said in a statement that the settlement monies were already reflected in existing litigation reserves.
