On January 8, 2021, the Department of Justice (DOJ) and Securities Exchange Commission (SEC) announced that Deutsche Bank would pay more than $130 million to resolve investigations into Foreign Corrupt Practices Act (FCPA) violations and a commodities fraud scheme.
The charges arose out of two distinct sets of allegations: First, the government alleged that between 2009 and 2016, Deutsche Bank maintained false books and records in order to conceal corrupt payments and bribes made to third-party business development consultants acting as proxies for foreign officials; it also failed to implement internal accounting controls to prevent such payments in violation of the FCPA's accounting provisions. Second, the government alleged that between 2008 and 2013, Deutsche Bank traders fraudulently manipulated commodity exchanges through a practice known as "spoofing": placing orders to buy precious metals futures contracts with the intent to cancel those orders before execution in order to create the false impression of genuine supply and demand for those contracts. This settlement comes after three Deutsche Bank traders were convicted at trial or pleaded guilty for their role in this purported spoofing scheme, with a fourth trader awaiting trial.
As part of this settlement, Deutsche Bank entered into a three-year deferred prosecution agreement with DOJ's Fraud Section and Money Laundering and Asset Recovery Section and with the US Attorney's Office for the Eastern District of New York. The bank agreed to pay criminal penalties of more than $85 million, criminal disgorgement of $681,480, victim compensation payments of more than $1.2 million, and more than $43 million to the SEC. The bank also agreed to take measures to continue to enhance its internal accounting controls and anti-corruption and anti-bribery programs. In addition, the bank agreed to reduce its use of business development consultants significantly and to review, vet, and enhance due diligence for all consultant contracts.
This settlement highlights several trends in DOJ enforcement. For instance, in 2019, the DOJ Fraud Section created a new sub-unit specializing in commodities fraud and has built up its data analytics tools to target increasingly sophisticated types of commodities fraud such as spoofing. These efforts to expand the scope of criminal investigations and enforcement actions in connection with manipulative practices in the commodities markets have already yielded results. In September 2020, JPMorgan Chase reached a $920 million settlement with DOJ, the SEC, and the Commodity Futures Trading Commission to resolve investigations into spoofing in the trade of precious metals futures contracts.
Also, despite the practical difficulties that COVID-19 has posed for federal prosecutors investigating overseas conduct, including potential FCPA violations, DOJ concluded a record-breaking year in 2020 with eight major FCPA settlements, including two multi-billion-dollar settlements with Goldman Sachs and Airbus SE. These eight settlements yielded over $7 billion in payments to enforcement authorities in the United States and abroad.
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