Deutsche Bank fined for $10 billion sham Russian trades

Tue Jan 31, 2017 11:40am EST
 
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By Karen Freifeld and Arno Schuetze

NEW YORK/FRANKFURT (Reuters) - Deutsche Bank (DBKGn.DE: Quote) has agreed to pay $630 million in fines for organizing $10 billion in sham trades that could have been used to launder money out of Russia, the latest in a string of penalties that have hammered the German lender's finances.

In two detailed reports, U.S. and British regulators criticized the bank for not knowing the customers involved or the source of money for the trades, which helped buoy revenue during a slowdown following the global financial crash.

The scheme involved so-called mirror trades carried out between 2011 to 2015 - for instance, buying Russian stocks in roubles for a client and selling the identical value of a security for U.S. dollars for a related customer.

The New York Department of Financial Services outlined a web of trades "converting roubles into dollars through security trades that had no economic purpose" and stretched from Moscow, London and New York to Cyprus and the British Virgin Islands.

"I have a billion rouble today ... will you be able to find a security for this size," the watchdog cited one party to a deal as telling a Deutsche Bank trader in Moscow.

The regulator said the bank had missed numerous opportunities to prevent the scheme. "These flaws allowed a corrupt group of bank traders and offshore entities to improperly and covertly transfer more than $10 billion out of Russia."

It said the scheme - in which the parties involved often lost money on the trades due to fees and commissions - could have been used for money laundering.

While U.S. and British regulators - which fined Deutsche $425 million and $204 million respectively - penalized the bank for not having adequate controls, they did not say top management was aware of the improper nature of the trades.   Continued...

 
A statue is pictured next to the logo of Germany's Deutsche Bank in Frankfurt, Germany September 30, 2016. REUTERS/Kai Pfaffenbach/File Photo