On January 8, 2021, Deutsche Bank Aktiengesellschaft, a multinational financial services company headquartered in Frankfurt, Germany, agreed to pay more than $130 million to resolve investigations by the US Department of Justice and US Securities and Exchange Commission into violations of the US Foreign Corrupt Practices Act and for engaging in commodities fraud. As part of the coordinated resolution, Deutsche Bank entered into a three-year deferred prosecution agreement with the DOJ and an administrative resolution with the SEC.
According to the DPA and SEC Order, between at least 2009 and 2016, Deutsche Bank entered into contracts with third-party “Business Development Consultants” (BDCs) in order to obtain and retain business in numerous countries, including Saudi Arabia, Abu Dhabi, and Italy. Deutsche Bank’s internal audit function issued a report in 2009 identifying that a lack of oversight over the BDC arrangements created risks that they could be used for corrupt purposes. Despite this report, a number of BDC arrangements were approved by Deutsche Bank management and were subsequently used by Deutsche Bank to make improper payments to government officials.
In particular, in 2010 Deutsche Bank contracted with a BDC based in Abu Dhabi, who was a relative of a high-ranking Abu Dhabi official in charge of a state-owned Abu Dhabi investment vehicle, in order to obtain business with the investment vehicle. Deutsche Bank managers knew at the time of the contract that the relative was the “gate keeper” to the Abu Dhabi official and that contracting with the relative was necessary to obtain business from the investment vehicle, but did not conduct any diligence on the BDC prior to entering into the contract. In all, Deutsche Bank paid the BDC approximately $3.4 million without any invoices and with minimal evidence that the BDC provided any bona fide services in return, falsely recording the payments as “consultancy” payments. Similarly, in 2011 in Saudi Arabia Deutsche Bank entered into a BDC contract with a third party owned by the wife of an individual who managed funds for a Saudi government official. Deutsche Bank managers knew at the time of the contract that the BDC was owned by the wife of the fund manager, and that the purpose of the contract was to corruptly pay the fund manager in order to obtain and retain business with the Saudi government official’s fund. Deutsche Bank made over $1 million in payments to this BDC, falsely recording these payments as “referral fees.” Finally, in Italy, Deutsche Bank maintained a BDC relationship with a regional tax judge, the purpose of which was to obtain business for Deutsche Bank from referrals by the tax judge. Although Deutsche Bank entered into contracts with this tax judge, it made numerous payments to the tax judge outside the scope of those called for by the contract and for uncertain purposes, and used various false descriptions when recording these additional payments in its books and records. In all, Deutsche Bank made over $860,000 in payments to the Italian tax judge.
With respect to the commodities fraud, according to the DPA, Deutsche Bank employees and agents in London, Singapore, and New York placed fraudulent orders to buy and sell precious metals futures contracts, which artificially altered the supply of and demand for such contracts, thus manipulating the prices for such contracts and deceiving other traders.
As a result of these actions, Deutsche Bank entered into a three-year DPA with the DOJ, under which it agreed to (i) pay a $79,561,206 criminal penalty in connection with conspiracy to violate the FCPA’s accounting provisions, (ii) pay a $5,625,000 criminal penalty (credited against a 2018 $30 million civil penalty imposed by the CFTC), pay $681,480 in disgorgement, and pay $1,223,738 in victim compensation, in connection with commodities fraud, and (iii) continue cooperating with U.S. and non-U.S. enforcement agencies in connection with ongoing investigations into this and related conduct. The DOJ noted in the DPA that Deutsche Bank received full cooperation credit, but that it did not voluntary disclose the misconduct. The DPA also noted that Deutsche Bank had undertaken significant remedial measures, including a thorough root cause analysis, disciplining or terminating certain employees, enhancing its internal accounting controls and anti-corruption program, and improving oversight over its BDC program. In light of this remediation (and because Deutsche Bank has an ongoing compliance monitor stemming from its 2015 DOJ resolution for criminal violations arising from the Company’s manipulation of the London Interbank Offered Rate), the DOJ determined that an independent monitor was unnecessary. Deutsche Bank also entered into an administrative resolution with the SEC, under which the Company agreed to cease and desist from violating the FCPA’s accounting provisions and to pay $35,145,619 in disgorgement and $8,184,003 in prejudgment interest.
DOJ press release | SEC press release | Information | DPA | SEC order