Deutsche Bank settles AML failings with New York state regulators, agrees to pay $150 million

On July 6, 2020, the New York State Department of Financial Services  entered into a consent order with Deutsche Bank AG, Deutsche Bank AG New York Branch, and Deutsche Bank Trust Company America (together “Deutsche Bank”) to resolve an investigation into the bank’s compliance with New York banking laws. As alleged in the consent order, the DFS determined that Deutsche Bank failed to meet the requirement that it devise and implement systems reasonably designed to identify and report suspicious activity, and block transactions prohibited by law.  Deutsche Bank allegedly failed to monitor adequately the activity of its high risk customers. 

In the first instance, the bank failed to monitor the account activity of a registered sex offender, Jeffrey Epstein, whose transactions between August 2013 and December 2018 totaled millions of dollars and should have been subject to heightened scrutiny by the bank.  According to the consent order, a memorandum compiled in advance of the transfer of Epstein’s accounts to Deutsche Bank in 2013 contained information about Epstein’s 2008 plea deal and prison sentence for soliciting underage prostitutes, and 17 out-of-court civil settlements related to the criminal conduct; at the same time, the memorandum highlighted how lucrative the relationship with Epstein could be.  Although Deutsche Bank classified its relationship with Epstein as “high-risk” and hence subject to enhanced due diligence, scrutiny of transactions on his accounts was not tailored to the specific risks he posed.  The consent order details numerous instances in which Epstein and his representatives sent wires to alleged co-conspirators in past criminal offenses and to the Russian bank accounts of women suspected of participating in illicit transactions with Epstein.  According to the DFS, not only did Deutsche Bank fail to prevent these and other suspicious transactions and continued to maintain its relationship with Epstein despite additional red flags, it committed procedural errors in the manner in which it oversaw the Epstein accounts, and failed to implement the conditions imposed by the bank’s own reputational risk committee. 

The second issue covered by the settlement concerns Deutsche Bank’s correspondent relationships with two foreign banks, Danske Estonia and FBME.  Following an investigation of Deutsche Bank’s relationship with these entities, DFS concluded that despite suspicious transactions and red flags, Deutsche Bank facilitated 478,379 dollar-denominated transactions with FBME amounting to more than $618 billion over the course of several years.  With regard to Danske Estonia, DFS found that although Deutsche Bank was aware of issues concerning non-resident customer accounts, and its anti-money laundering monitoring system had flagged 340 suspicious transactions, the bank continued facilitating transactions for Danske Estonia, clearing over $267 billion between 2007 and 2015.  DFS determined that Deutsche Bank had failed to maintain policies that set out sufficiently specific criteria for the bank to determine whether to terminate a correspondent banking relationship or take other risk-mitigation measures.  DFS also concluded that the bank failed to maintain policies that provided for the closure of accounts based on the failure to obtain an appropriate USA Patriot Act certification, and that the bank failed to provide adequate guidance to facilitate implementation of its AML policies.

In reaching the settlement, DFS gave substantial weight to Deutsche Bank’s “exemplary cooperation” over the course of several years, and the bank’s efforts at remediation, beginning before the DFS initiated its investigation.  The department found that Deutsche Bank conducted business in an unsafe and unsound manner, in violation of New York Banking Law § 44. 113, and that the bank failed to maintain an effective and compliant anti-money laundering program, in violation of 3 NYCRR § 116.2.  In addition to the $150 million penalty, the settlement requires Deutsche Bank to continue working with an independent monitor selected by DFS to help implement a consent order entered into by the parties in January 2017.

DFS press release | Consent order 

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