Deutsche Bank Has Agreed To Pay

The US regulator charged Deutsche bank $258 million for doing business with US sanctioned entities like Syria and Iran. The German bank subsequently agreed to pay this amount in penalties to the New York State Department of Financial Services (DFS), US central bank and the Federal Reserve. The DFS is also investigating the bank for allegedly manipulating the foreign exchange market and facilitating money laundering in Russia.

Before the DFS nabbed Deutsche bank, it had fined BNP Paribas $8.9 billion and Credit Agricole $787 million for violating laws that prevented work for clients in US-sanctioned nations such as Sudan, Syria, Iran and Myanmar. These banks had higher illegal transactions than the Deutsche bank.

Why Exactly Is The Bank Paying For Penalties

Between 1999 and 2006, Deutsche bank illegally disguised 27,200 dollar-clearing transactions to circumvent US sanctions on its clients, who included Sudan, Libya, Iran, Syria and Myanmar. These illegal transactions were valued to be more than $10.86 billion.

According to the Federal Reserve, the bank did not have adequate procedures and policies to ensure that activities conducted outside the US complied with the United States sanction laws. The bank was also accused of failing to report the activities in a timely manner in response to inquiries the Federal Bank of New York had made. Out of the $258 million penalty, the Federal Reserve expects the bank to pay it $58 million.

The New York State Department of Financial Services (NYDFS) on the other hand said that apart from dealing with sanctioned entities, the bank illegally conducted business with entities on the Specially Designated Nationals (“SDN”) List of the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”). It also said that during this period, between 1999 and 2006, bank employees recognized the sanction rules would pose problems for US dollar payments transacted through the United States, including those done at Deutsche bank. The NYDFS accused the employees of cashing in on the illegal ‘lucrative’ business as opposed to following the law. They had reportedly devised ways to circumvent the checks and controls designed by the US and proceeded to trade with these businesses.

What The Penalty Entails

In addition to paying the million dollar penalty, Deutsche bank is required to install an independent monitor which will track transactions. The bank is also expected to fire 6 employees who took part in the sanctions-evasion scheme, as well as prevent 3 other employees from any sort of involvement in the bank’s US operations.

Deutsche Bank’s Reaction

The bank openly welcomed the agreement with the United States regulators. In a statement, the bank asserted that it was indeed pleased to have reached a resolution with the Federal Reserve and the New York Department of Financial Services.

The bank was also keen to clarify that these illegal activities stopped several years ago and since then, it had ceased any and all transactions with parties from the sanctioned countries.

Final Thoughts

There have been cases of these illegal activities between banks and sanctioned countries before. Clearly a small fine does not compare with the profits the banks illegally made during such periods. It is therefore prudent to devise other better and more effective methods of dealing with this vice.