FCA fines Deutsche Bank £163m for anti-money laundering control failings

Deutsche Bank has been slapped with a £163m fine by the Financial Conduct Authority for failing to maintain adequate anti-money laundering controls.

This is the largest financial penalty for anti-money laundering controls ever imposed by the FCA, or its predecessor, the Financial Services Authority.

The FCA said that as a result of its inadequate AML control framework, Deutsche was used by unidentified customers to transfer around $10bn, of unknown origin, from Russia to offshore bank accounts in a manner that is “highly suggestive of financial crime”, between January 2012 and December 2015.

Mark Steward, director of Enforcement and Market Oversight at the FCA, said: “Financial crime is a risk to the UK financial system. 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.

“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.”

The regulator found significant deficiencies throughout Deutsche’s AML control framework, with its Corporate Banking and Securities division in the UK performing inadequate customer due diligence, failing to ensure that its front office took responsibility for the CB&S division’s Know Your Customer obligations and using flawed customer and country risk rating methodologies.

In addition, the division had deficient AML policies and procedures, an inadequate AML IT infrastructure, lacked automated AML systems for detecting suspicious trades and failed to provide adequate oversight of trades booked in the UK by traders in non-UK jurisdictions.

As a result of these failings, Deutsche Bank did not obtain sufficient information about its customers to inform the risk assessment process and to provide a basis for transaction monitoring.

The failings allowed the front office of Deutsche Bank’s Russia-based subsidiary (DB Moscow) to execute more than 2,400 pairs of mirror trades between April 2012 and October 2014.

The mirror trades were used by customers of Deutsche Bank and DB Moscow to transfer more than $6bn from Russia, through Deutsche Bank in the UK, to overseas bank accounts, including in Cyprus, Estonia, and Latvia.