Varanasi iStock-526309075 670x270

FCA fines Deutsche Bank for anti-money laundering controls failings

Failure to provide for adequate anti-money laundering control framework proved to be a costly mistake for Deutsche Bank as the Financial Conduct Authority (‘FCA‘) decided to slap them an unprecedented fine of £163,076,224 for it on 31st January 2017. Apart from being the highest ever financial penalty issued by FCA for Anti-Money Laundering (‘AML‘) surveillance failure, this decision once again reiterated FCA’s no-nonsense attitude towards protecting the UK financial system from financial crimes and is expected to serve as a warning for other firms who have not yet complied with the required AML guidelines.

In a press release published on the same day, the FCA explained how the Bank’s lax AML controls allowed customers of questionable credentials to use its services to convert Russian Roubles into US dollars and consequently transfer approximately $10 billion from Russia to offshore bank accounts in Cyprus, Estonia, and Latvia “in a manner that is highly suggestive of financial crime”. Specifically, the FCA noted how, during the period between 1 January 2012 and 31 December 2015, Deutsche Bank’s inadequate customer due diligence, erroneous customer and country risk rating methodologies, insufficient AML IT infrastructure and lack of automated AML systems for detecting suspicious trades together failed to provide for successful transaction monitoring of traders from non-UK jurisdictions.

Money often costs too much.”
Ralph Waldo Emerson

The Bank was thus held to have breached Principle 3 of FCA’s Principles for Businesses regarding adequate risk management systems, in addition to Senior Management Arrangements, Systems and Controls (SYSC) rules 6.1.1R and 6.3.1R. Exceptional cooperation and agreeing to settle at an early stage of the investigation qualified the Bank for a 30% discount, without which the financial penalty could have been £229,076,224.

The FCA decision came right after the news of the Bank’s £340 million fine to New York Department of Financial Services for the same Russian mirror-trading scheme, in a world-wide attempt to clamp down on money laundering schemes. Four years ago, HSBC was also fined by US finance regulators by a record amount of £1.2 billion for its “blatant failure” to implement AML controls and was even sued under the Anti-Terrorism Act in February 2016 by a group of American families for allegedly supporting the money laundering schemes that cost the lives of their family members. Given the multi-jurisdictional effect of the current AML control failure of Deutsche Bank, a similar consequence will not be very surprising.

Expert Evidence Limited prides itself on assisting throughout the legal process where required and is a professional firm concentrating on the four main areas of dispute resolution; acting as expert witnesses in financial litigation, mediation, arbitration and adjudication. The firm has a civil, criminal and international practice and has advised in many recent cases. Areas of specialisation include banking, lending, regulation, investment, and tax.

Ask a question about \Expert Witness services. We are here to help!

Contact Us Now

Disclaimer – Please confirm any of the above views with your solicitor. Expert Evidence takes no responsibility or provides any guarantee that the views above are correct for your particular case or jurisdiction.