United States: Fed Warned Deutsche Bank Over Anti-Money-Laundering Backsliding

The Federal Reserve told Deutsche Bank AG DB 0.40% in recent weeks that the lender is failing to address persistent shortcomings in its anti-money-laundering controls, according to people familiar with the matter.

The Fed’s frustration has escalated to a point that the bank could be fined, the people said.

Deutsche Bank has poured massive resources into addressing repeated shortcomings and penalties related to allowing suspect transactions. The Fed told Deutsche Bank that instead of making progress, the German lender with a large Wall Street presence is backsliding. The regulator has said that some of the anti-money-laundering control problems require immediate attention, according to the people.

A spokesman for Deutsche Bank said the bank doesn’t comment on dialogue with regulators. A spokesman for the Fed declined to comment.

The Fed’s harsh words contrast with the bank’s message that it has worked diligently to improve its systems and has put most of its legal troubles in the past.

The Fed’s latest warning comes four years after it classified Deutsche Bank’s U.S. operations as being in “troubled condition,” a rare rebuke for a major bank. In May 2020, it issued a fresh admonishment over the bank’s money-laundering controls.

In 2020, Deutsche Bank also settled with New York’s Department of Financial Services over the bank’s role as a correspondent bank in one of Europe’s largest money-laundering scandals and for failing to properly monitor its dealings with late financier and convicted sex offender Jeffrey Epstein.

In 2017, the Fed fined Deutsche Bank $41 million for failing to maintain an effective anti-money-laundering program.

Deutsche Bank is Germany’s largest lender and as a dollar clearing bank regulated by the Fed, is a major player in global financial transactions.

Banks are required to police how money flows through their networks to guard against proceeds from criminal activities moving around the economy. They are required to know who their customers are and to flag transactions that indicate potentially illegal activity to authorities.

The original full article can be found at wsj.com

(PHOTO: RON ADAR/SOPA IMAGES/ZUMA PRESS)

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