Exposed: how Deutsche Bank helped customers evade US sanctions

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US financial regulators have imposed a $US258 million ($392m) fine on Deutsche Bank, exposing its deliberate efforts to conceal huge international cash transfers by sanctioned customers from scrutiny.

Announcing the fine, the New York Department of Financial Services published email excerpts from Deutsche Bank employees revealing their attempts to keep the activity secret.

“As usual, let’s not revert to the client in writing due to the reputational risk involved if the e-mail goes to wrong places.  Someone should call [the client] and tell them orally and ensure that the conversation is not taped. . . . Let’s also keep this e-mail strictly on a ‘need-know’ basis,” said one.

Another informed a colleague that details of how the bank evaded regulatory scrutiny were strictly confidential.

“Compliance does not want us to distribute such info to third parties, and forbids us explicitly to do so in any written or electronic form,” it said.

The transactions involved $US10.86 billion transferred for customers in Iran, Libya, Syria, Sudan and Burma between 1999 and 2006.

All those countries were subject to US Treasury Office of Foreign Asset Control sanctions and the transactions also included customers on the Specially Designated Nationals list.

The SDN list details specific entities controlled by those countries, as well as groups involved in terrorism and the drug trade.

Transactions involving OFAC and SDN customers sent to or cleared through the US would normally be subject to extra scrutiny and could be frozen by US regulators.

Deutsche Bank evaded that scrutiny using what one email called “tricks and cunning” to strip identifying information from the transactions.

“During site visits, in emails, and during phone calls, clients were instructed to include special notes or code words in their payment messages that would trigger special handling by the bank before the payment was sent to the United States,” said the regulator.

Deutsche Bank in Europe staff took care to keep staff at their New York branch in the dark about the illegal arrangements, it said.

“For example, a relationship manager who did significant business with Iranian and Syrian customers complained to his boss that colleagues in the Middle East ‘participated in a major conference call with senior management of [Deutsche Bank New York] and provided an overview of DB’s account activities with Syria outside the U.S. 

"Senior management of [Deutsche Bank New York] complained strongly to DB Frankfurt that they see this as a 'breach of law.’  The relationship manager viewed this incident not as a prompt to re-examine the bank’s Syrian business, however, but rather as indicating a need to better train the non-U.S. staff who handle the ‘very lucrative’ Syrian and Iranian business to ensure such disclosures do not occur in the future.”

Several staff involved in the transactions no longer work for Deutsche Bank and the regulator ordered a further six to be fired.

Department of Financial Services acting superintendent Anthony Albanese said the regulator was committed to investigating and pursuing sanctions violations and money laundering at financial institutions.

“We are pleased that Deutsche Bank worked with us to resolve this matter and take action against individual employees who engaged in misconduct. To truly deter future wrongdoing, it is important to focus not just on corporate accountability, but also individual accountability.”

Last week Deutsche Bank announced the closure of its New Zealand office, which employs 29 staff, as part of a global restructure.

There are two entities on the SDN list with New Zealand links. One is Kaikai Technology, a Chinese company with an address at 334 Te Atatu Road South in Auckland, listed under the Foreign Narcotics Kingpin Sanctions programme. The New Zealand company of that name was struck off in 2013.

The other is Tamils Rehabilitation Organisation, whose numerous addresses include a PO Box at Dominion Road Post Office in Auckland, listed under the Global Terrorism Sanctions Regulations.

RAW DATA
The regulator’s press release here

The court order here

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