On January 31, 2017, the FCA published a final notice issued to Deutsche Bank AG and fined the bank £163 million for failing to maintain an adequate AML control framework between January 1, 2012 and December 31, 2015. Deutsche Bank notified the FCA in early 2015 of concerns about its AML control framework after the bank had begun an investigation into suspicious securities trading, known as "mirror trading." The orders for both sides of the mirror trades were received and executed by Deutsche Bank's Moscow office. The Moscow office executed the trades on behalf of Deutsche Bank via remote booking by directly booking trades to Deutsche Bank's trading books in the UK. The FCA's investigation revealed that the mirror trading was able to be executed by Deutsche Bank's Moscow office because of the widespread deficiencies in the bank's AML control framework, in particular, the bank performed inadequate customer due diligence, failed to ensure that its front office took responsibility for it's Know Your Customer obligations, used flawed customer and country risk rating methodologies, had deficient AML policies and procedures, had an 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.
The FCA noted that the scale, volume and the way the trades were conducted were "highly suggestive" of financial crime. Deutsche Bank was used by unidentified customers to transfer approximately $10 billion, of unknown origin, from Russia to offshore bank accounts. As a result, the bank had put itself and the UK financial system at risk. However, the regulator considered that the failings in the AML framework had not been committed deliberately or recklessly and there was no evidence that any of the senior management or employees of Deutsche Bank in London had been aware of or involved in the suspicious trading.
The fine is made up of a disgorgement of around £9 million and a penalty of £154 million. Deutsche Bank has undertaken to cooperate with any other regulator or enforcement agency that is investigating or commences an investigation into the matter.
The final notice is available at: https://www.fca.org.uk/publication/final-notices/deutsche-bank-2017.pdf ; and the FCA announcement is available at: https://www.fca.org.uk/news/press-releases/fca-fines-deutsche-bank-163-million-antimoney-laundering-controls-failure .
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