Deutsche Bank, Germany's largest, is the focus of at least two high-profile investigations as top American banking regulators wonder about its part in a huge Danish financial scandal and high-ranking Democrats expected to look into the bank’s loans to President Trump.
On things rotten in Denmark: If it looks like an investigation, probes like an investigation and talks like an investigation, then it probably is an investigation.
Nonetheless, Deutsche Bank is denying media reports that the US Federal Reserve is probing Deutsche's role as correspondent bank in Danske Bank’s $230 billion money-laundering scandal. Correspondent banks act as conduits for moving money abroad.
Rather, says Germany’s largest bank, it is cooperating with queries from regulators and law enforcement authorities around the world.
Know thy customer
Bloomberg reported that the Fed was looking into whether Deutsche Bank had sufficient systems in place to monitor these money flows for suspicious activity. The bank’s standpoint has been that as a correspondent bank, it didn’t have any knowledge of what Danske customers were up to – and didn’t need to.
The Fed may see it differently since the rule to report suspicious activity doesn’t exempt correspondent banks. The USA Patriot Act, in fact, calls for banks to exercise due diligence, and in some cases enhanced due diligence, on correspondent accounts maintained for foreign banks. The Fed declined to comment.
But the Danske investigation isn’t Deutsche’s only current headache. House Intelligence Chairman Adam Schiff and Financial Services Chair Maxine Waters are coordinating their investigation’s of the bank as one of the few lenders to President Trump and his family’s businesses, according to Politico.
Waters had previously asked Deutsche for more information but the bank demurred, citing privacy regulations. Now as a committee chair, Waters has subpoena powers and can compel the bank to divulge the info. However, she must first wait until the committee has its first meeting, which is set for later this month, according to Reuters.
Russia? Saudi Arabia?
Schiff told Politico he’s interested in any possible money laundering by Trump’s web of companies as well as any connections to Russia and Saudi Arabia. Another politician said he wants to investigate possible favoritism in the form of beneficial interest rates on the loans.
Considering the marathon nature of congressional inquiries, the Danske investigation may be more pressing.
Fed investigations are often bad news. The US central bank along with other bank regulators levied fines of $700 billion (€617 billion) against Deutsche in 2017 for inadequate money-laundering controls in Russia. The US Justice Department is still conducting a criminal investigation in that case, so further penalties cannot be excluded.
Deutsche has been flooded recently with other money-laundering probes. Scores of officials searched the bank’s headquarters for two days last November, seeking evidence of money-laundering in a former Caribbean unit following a lead in the Panama Papers.
We’ve got bigger problems
BaFin, the German securities watchdog, last year pressured Deutsche to do more to combat money laundering and terrorist financing and installed an auditor in the bank to monitor its progress.
Deutsche Bank CEO Christian Sewing said last week that another internal investigation of potential money laundering had not found any evidence of misbehavior on the part of the bank.
The money-laundering investigations are distracting Sewing from his efforts to restore profitability and rebuild credibility for the bank after a decade of mismanagement, losses and fines. He was appointed last spring to succeed John Cryan, who was luckless in three years at the helm in turning the bank around.
The hope was that Sewing, a dyed-in-the-wool Deutsche banker who has spent virtually his whole career at the bank, would succeed in returning the bank to its roots and recapture some of its former glory. But he has been forced to fight a rearguard action as further sins of the past catch up with the lender, chasing away customers and driving the stock price to historic lows.
This article by Handelsblatt staff was adapted into English for Handelsblatt Today by Darrell Delamaide, a writer and editor based in Washington, DC. To contact the author: [email protected]