An investment bank agreed to pay a civil monetary penalty of $205 million as part of an agreement with the New York State Department of Financial Services ("DFS") to settle claims that it failed to implement effective internal controls to prevent "improper, unsafe, and unsound" trading practices within its foreign exchange ("FX") business.
According to the Consent Order, Deutsche Bank AG and its New York branch ("Deutsche Bank") permitted traders, salespeople and supervisors to engage in improper conduct designed to increase their profits at the expense of customers and the market. The alleged misconduct included:
- coordinating with traders at other banks in online chat rooms as to FX prices;
- discussing FX benchmark fix-related trading in chat rooms with other traders;
- manipulating submissions made by Deutsche Bank and other banks to submission-based foreign currency benchmarks in certain emerging market currencies;
- colluding with traders at other banks in the bid/offer spreads offered to FX customers for FX non-deliverable forward contracts in emerging market currencies;
- trading aggressively to manipulate prices in certain emerging market currencies to trigger or defend FX barrier options (at customers' expense); and
- hiding markups charged on executed trades.
DFS noted Deutsche Bank's "extraordinary cooperation" with the investigation, including by conducting an extensive internal investigation, engaging in proactive remedial steps, and taking disciplinary action such as the termination of multiple employees engaged in misconduct.
To meet conditions of the settlement, Deutsche Bank will submit to DFS (i) an enhanced written internal controls and compliance program, (ii) a written plan on how it will improve its compliance risk management program and (iii) a revised written internal audit program to conform with applicable laws and regulations, as well as internal policies and procedures.
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