The regulator found that the bank failed to maintain an adequate anti-money laundering (AML) control framework between 1st January 2012 and 31st December 2015.

Deutsche Bank failed to properly oversee the formation of new customer relationships and the booking of global business in the UK. 

As a consequence of its inadequate AML control framework, the bank was used by unidentified customers to transfer around £8bn, of unknown origin, from Russia to offshore bank accounts in a manner highly suggestive of financial crime.

Although Deutsche Bank agreed to settle at an early stage of the FCA investigation and therefore qualify for a 30% discount – meaning it avoided a fine of over £229m – this is still the largest financial penalty for AML controls failings ever imposed by the FCA, or its predecessor the Financial Services Authority.

The discount did not apply to the the £9.1m in commission the bank generated from the suspicious trading, which was disgorged as part of the overall penalty, meaning that the firm received no financial benefit from the breach. 

Mark Steward, director of enforcement and market oversight at the FCA, said that by failing to maintain an effective AML control network, Deutsche Bank put itself at risk of being used to facilitate financial crime and exposed the UK to the risks of financial crime.

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“The size of the fine reflects the seriousness of Deutsche Bank’s failings.  

“We have repeatedly told firms how to comply with our AML requirements and the failings of Deutsche Bank are simply unacceptable.  

“Other firms should take notice of today’s fine and look again at their own AML procedures to ensure they do not face similar action.”
 

The FCA found significant deficiencies with Deutsche Bank’s AML control framework

Deficiencies throughout Deutsche Bank’s AML control framework

During the relevant period, the FCA found that Deutsche Bank’s Corporate Banking and Securities division (CB&S) in the UK, performed inadequate customer due diligence; failed to ensure its front office took responsibility for the CB&S division’s Know Your Customer obligations and used flawed customer and country risk ratings methods.

It was also found to have deficient AML policies and procedures; inadequate AML IT infrastructure; lacked automated AML systems for detecting suspicious trades and failed to provide adequate oversight of trades booked in the UK by traders in non-UK jurisdictions. 

Therefore, the FCA found that Deutsche Bank failed to obtain sufficient information about its customers to inform the risk assessment process and to provide a basis for transaction monitoring, with these failings allowing the front office of the bank’s Russian-based subsidiary to execute more than 2,400 pairs of trades that mirrored each other between April 2012 and October 2014.

These mirror trades were used by customers of Deutsche Bank and its subsidiary DB Moscow to transfer more than £4.8bn from Russia, through Deutsche Bank in the UK, to overseas bank accounts. 

The customers on the Moscow and London sides of the mirror trades were found to be connected to each other and the volume and value of the securities was the same on both sides.

These mirror trades took place in order to convert roubles into US dollars that were then covertly transferred out of Russia, which is highly suggestive of financial crime.

A further £3.1bn in suspicious ‘one-sided trades’ was also found to have occurred and the FCA believes that some, if not all, of an additional 3,400 trades formed one side of mirror trades that were often conducted by the same customers involved in the mirror trading.

The FCA noted that Deutsche Bank was “exceptionally cooperative” during the investigation and the bank has committed significant resources to a large-scale remediation programme to correct its AML control framework deficiencies.