MONEY LAUNDERING Deutsche Bank reaches $630 million settlement over Russia trades

Germany’s largest financial institution agreed to pay $630 million in U.S. and British fines to settle accusations of money laundering in Russia. While the bank's stock rose as much as 2 percent, Deutsche still faces a U.S. criminal investigation into the matter.
From Russia with love. Photo: DPA

Deutsche Bank agreed to pay approximately $630 million in fines to settle allegations that it helped Russian clients illegally move money across borders.

The New York State Department of Financial Services said Monday evening it would be issuing a fine of $425 million, while the U.K’s Financial Conduct Authority announced on Tuesday a penalty of £163 million or some $204 million.

The joint settlement by the U.S. and U.K. authorities is lower than the $1 billion originally anticipated. Investors cheered the settlement, sending Deutsche Bank's stock up as much as 2 percent. By 09:37 A.M. in Frankfurt, shares were up 1.6 percent at 18.88, outperforming the German blue-chip DAX Index, which rose 0.1 percent.

The resolution in the Russia case is Deutsche Banks's second major settlement in a month. In December, the bank reached a $7.2 billion settlement with the U.S. Justice Department over involvement in toxic mortgage-backed securities in the run-up to the financial crisis. In 2015, it agreed to pay $2.5 billion to U.S. and British authorities to settle allegations of interest rate-rigging.

Since taking over in July 2015, Deutsche Bank's Chief Executive John Cryan, has made it a priority to clear up the bank's legal disputes and turn around its fortunes. Uncertainty over the size of the settlements weighed on shares last year and even led to speculation in September that Deutsche Bank might need state aid – a rumor the bank denied.

Deutsche Bank still faces a criminal investigation into the Russia trades by the U.S. Department of Justice, according to news agency Bloomberg.

The current fines relate to a practice known as mirror trading, which uses automated software to "mirror" a given trading strategy and carry out trades around the clock based on an algorithm of preselected goals, risk tolerance and currency. This allowed Deutsche Bank to help Russian clients circumvent money laundering controls and move approximately $10 billion out of Russia from 2011 to 2014.

The scheme could have facilitated capital flight, tax evasion, or other potentially illegal objectives. Maria T. Vullo, New York Department of Financial Services

According to the New York Department of Financial Services, the scheme involved Deutsche Bank clients buying stocks in Moscow in rubles, with related parties then selling the same stocks through Deutsche Bank’s London branch. The trade in question, typically worth around $2 million, would then be cleared through the New York branch. This would enable the original sellers to receive their money in U.S. dollars.

Maria T. Vullo, superintendent for financial services at the U.S. Department of Financial Services, said Deutsche Bank had failed to detect or stop the trading for several years even though “the scheme could have facilitated capital flight, tax evasion, or other potentially illegal objectives.”

In an official statement, the German bank said that it has cooperated with the investigation and set aside sufficient cash reserves to cover the fines.

Deutsche Bank has also agreed to hire an independent monitor to review the bank’s compliance systems.


Michael Maisch is the deputy chief of Handelsblatt's finance desk and based in Frankfurt, Germany's financial capital. Meera Selva is an editor at Handelsblatt Global. To contact: [email protected] and [email protected]