US authorities quiz Deutsche Bank over scandal at Danske
Federal Reserve examines German lender’s role in a €200bn money-laundering case
Deutsche Bank has been asked questions by US regulators about its role in the €200bn money-laundering scandal at Danske Bank’s Estonian offshoot, the German lender said on Wednesday morning.
“There are no probes but [we] received several requests for information from regulators and law enforcement agencies around the world,” Germany’s largest lender said in a statement.
Deutsche Bank was one of several correspondent banks used by Danske’s Estonian branch and it processed more than €160bn of potentially suspicious cross-border payments for the unit.
The scandal could provide a prominent test of whether banks are held accountable for the actions of the customers at rival banks when they clear US dollar transactions for other lenders.
Danske is being investigated in several countries for handling €200bn of money that flowed through its tiny Estonian unit on behalf of non-resident customers from Russia and other former Soviet states between 2007 and 2015.
After Deutsche Bank’s internal controls flagged a rising amount of suspicious transactions at Danske’s Estonian unit, it reported them to authorities and stopped clearing US dollars for the branch in 2015.
The German bank said on Wednesday that it “continues to provide information to and co-operate with the investigating agencies”. It was responding to a Bloomberg report that the US Federal Reserve was examining Deutsche Bank’s role in the scandal.
But Deutsche Bank said it was not the subject of any formal investigation by watchdogs over its role in the Danske scandal. It added that investigating authorities as well as the bank were interested in “the lessons to be learned” from the case.
As regulators have clamped down on dirty money flows, the world’s biggest banks have cut back on the number of correspondent banking relationships they have — fearing they could be punished for wrongdoing by customers of other lenders.
JPMorgan Chase was the first correspondent bank for US dollars to terminate its relationship with Danske in Estonia in 2013. Bank of America made a similar move two years later.
BaFin, Germany’s financial watchdog, asked Deutsche Bank for information about the affair late last year. However, a person familiar with the thinking of a senior European anti-money laundering official pointed out that Deutsche Bank’s customer was Danske, not the clients of the Danish bank who may have done suspicious transactions.
The person added that correspondent banks have neither the legal obligation nor the practical means to “know its customer’s customers”, hence Deutsche Bank’s regulators in Germany “are not losing sleep” about its role in the scandal.
A senior Deutsche Bank executive told the Financial Times in December that the lender was not aware “of any instances in which a correspondent bank has been held responsible for the know-your-customer failings of an originating bank”.
Christian Sewing, Deutsche Bank chief executive, said earlier this month that his bank investigated the Danske case long before the issue became public knowledge. The lender then started a second internal probe in October last year.
“We do have a big interest in continuing to get to the bottom [of it],” Mr Sewing said. “So far, we do not have any evidence for misconduct on our side.” A person familiar with Deutsche’s internal investigation said on Wednesday that this assessment was unchanged.
Shares in Deutsche Bank rose 1.6 per cent on Wednesday. Since hitting a new all-time low in December on concerns about the bank’s legal woes, the stock has risen close to 17 per cent.