One of the causes for the Panic of 1893 can be traced back to Argentina. One of the causes for the Panic of 2019 can be traced back to Argentina, another to Trumps’ Cabinet of Bankers. In 1893 @JPMorgan had to Bail Out the President, this time round it was @DeutscheBank #Panic

— LawsInTexas (@lawsintexasusa) August 14, 2019

#DidYouKnow MORTGAGE FRAUD – BANK FINES NO JAIL; Including both cash and non-cash consideration such as consumer relief, Bank of America paid $16.65 billion ; J.P. Morgan, $13 billion; Deutsche Bank, $7.2 billion; CORRECTION $0, THE GERMANS SAID HELL NO; THE DON OWES US! #Trump

— LawsInTexas (@lawsintexasusa) August 12, 2019

Deutsche Bank

Deutsche Bank’s position as one of the world’s leading financial institutions has been repeatedly tarnished in recent years in a series of scandals involving issues such as tax evasion and the sale of toxic mortgage securities.

It has paid more than $3 billion  in penalties related to allegations of violating U.S. economic sanctions and manipulating the LIBOR interest rate index. In 2019 the bank announced it was dramatically cutting back its international investment business.

Surviving Two Wars

Founded in Berlin in 1870, Deutsche Bank played a major role in financing electrification and railway expansion in Germany as well as other countries. It continued to grow until Germany’s defeat in the First World War and Allied demands for reparations put the country’s banking system in a precarious position.

To cope with the instability, Deutsche Bank merged with its main rival Disconto-Gesellschaft in 1929.

The combined operation, now far and away the leading bank in Germany, weathered the Depression and ensured its political survival through the war years by providing financial support to the Nazi regime and removing the Jewish members of its board directors.

After the war, Allied authorities determined that Deutsche Bank had not only actively supported the Nazi regime but had also maintained close ties to officials such as SS chief Heinrich Himmler and had been involved in appropriating assets of financial institutions in countries overrun by the Nazis.

The occupying forces divided the bank first into ten and then three regional institutions, one each for the north, central, and southern regions of West Germany. In 1957, however, the operations were reunited and allowed to function under the Deutsche Bank name once again.

The bank set out to build both its retail business and its international operations, which had been dismantled after the war. It became one of the leading participants in the Eurobond market. Deutsche Bank expanded its investments in a wide range of German companies, and the bank soon held seats on the supervisory boards of more than 100 firms, among them the biggest names in German industry.

In 1984 Deutsche Bank purchased a 4.9 percent interest in the British securities firm Morgan Grenfell, and five years later purchased the remainder of the firm.

By the late 1980s Deutsche Bank was actively pursuing a goal of becoming a global investment bank and a Europe-wide universal bank, offering corporate and consumer services as well as mutual funds and asset management.

The bank demonstrated its new assertiveness in 1990, when it wasted no time taking advantage of the collapse of Communism in East Germany by forming a joint venture with Deutsche Kreditbank (which four decades earlier had expropriated many Deutsche Bank operations).

Along with its rival Dresdner Bank, Deutsche Bank left U.S. banks in the dust in the rush east.

Nazi Collaboration Again an Issue

Deutsche Bank’s Nazi ties became an issue again in 1986, when it purchased the Flick industrial empire around the same time that a Flick subsidiary paid about $2 million to belatedly fulfill a pledge it had made in the 1960s to compensate about 1,300 Jews who had been used as slave laborers in its gunpowder factories during World War II.

In 1995 unearthed documents from East Germany provided new documentation of the ways in which Deutsche Bank helped the Nazis expropriate Jewish businesses.

The bank later expressed regret when a historian’s report indicated that it had engaged in gold transactions with the Nazi regime.

In 1994 Deutsche Bank found its image tarnished because of its close ties with the giant Jurgen Schneider real estate group, which collapsed amid reports of accounting irregularities.

Several Deutsche Bank executives were ousted in the wake of an auditor’s report that found that the bank was careless in its lending of some $750 million to Schneider.

To advance its goal of becoming a global investment bank, Deutsche Bank announced plans in 1998 to acquire New York-based Bankers Trust.

Like Deutsche Bank, Bankers Trust was testing the limits of what a commercial bank could do, but its aspirations were impeded by a series of scandals.

In the mid-1990s those controversies stemmed from charges of deceptive investment sales practices. One of its major institutional customers, Procter & Gamble, brought a racketeering suit that accused Bankers Trust of engaging in fraudulent practices in its derivatives business. (The bank settled the case for about $200 million.)

Just a few months after the Deutsche Bank acquisition was announced, Bankers Trust pleaded guilty to criminal charges that its employees had diverted $19 million in unclaimed checks and other credits owed to customers over to the bank’s own books to enhance its financial results.

The bank paid a $60 million fine to the federal government and another $3.5 million to New York State. One executive later pleaded guilty to a related criminal charge.

Abusive Tax Shelters

Deutsche Bank was also having its own legal problems during this period. In June 1998 its offices were raided by German criminal investigators looking for evidence that the bank helped wealthy customers engage in tax evasion.

In 2004 investors who purchased what turned out to be abusive tax shelters from Deutsche Bank sued the company in U.S. federal court, alleging that they had been misled (the dispute was later settled for an undisclosed amount).

That litigation as well as a U.S. Senate investigation brought to light extensive documentation of Deutsche Bank’s role in tax avoidance.

In the 2000s, Deutsche Bank was cited numerous times by financial regulators for violations. In 2002 three U.S. agencies—the SEC, the New York Stock Exchange and NASD (the U.S. industry regulator now known as FINRA)—fined Deutsche Bank Securities $1.65 million for failing to adhere to requirements relating to the preservation of e-mail archives so they could be consulted in enforcement actions.

In 2003 the SEC penalized Deutsche Bank $750,000 for violating conflict of interest rules by failing to disclose its role in advising Hewlett-Packard on the acquisition of Compaq Computer at the same time that its asset management arm was voting its clients’ proxies in favor of the deal.

In 2004 Britain’s Financial Services Authority fined Deutsche Bank’s Morgan Grenfell unit £190,000 for violating rules relating to program trading. Shortly thereafter, NASD fined Deutsche Bank $5.29 million for taking excessive commissions in the allocation of shares of initial public offerings and later that year fined the bank $5 million for corporate high-yield bond trading violations.

Also in 2004, the SEC announced that Deutsche Bank would pay $87.5 million to settle charges of conflicts of interest between its investment banking and its research operations.

In 2005 the Federal Reserve and the New York State Banking Department announced that Deutsche Bank had agreed to take steps to improve its policies designed to prevent money laundering by customers.

In 2006 the Financial Services Authority fined Deutsche Bank £6.3 million for “failing to observe proper standards of market conduct” in transactions involving shares of Scania and Cytos Biotechnology.

That same year, Deutsche Bank agreed to pay $208 million to U.S. federal and state agencies to settle charges of market timing violations.

During this period, Deutsche Bank chief executive Jose Ackermann personally paid 3.2 million Euros to settle criminal charges that he and other directors of the German telecommunications company Mannesmann awarded excessive bonuses to Mannesmann executives.

In 2007 Deutsche Bank agreed to pay $25 million (and give up $416 million in unsecured claims) to settle litigation relating to its dealings with bankrupt energy trader Enron Corporation.

In 2009 the SEC announced that Deutsche Bank would provide $1.3 billion in liquidity to investors that the agency had alleged were misled by the bank about the risks associated with auction rate securities.

Also that year, Deutsche Bank came under sharp criticism in the wake of revelations that it had used a private detective to spy on activist investors as well as some people inside the bank. Several executives were fired amid the scandal.

In 2010 FINRA fined Deutsche Bank Securities $575,000 for violating rules relating to short sales and then $7.5 million for “negligently misrepresenting delinquency data” in connection with the subprime mortgage securities.

Later that year, the U.S. Attorney for the Southern District of New York announced that Deutsche Bank would pay $553.6 million and admit to criminal wrongdoing to resolve charges that it participated in transactions that promoted fraudulent tax shelters and generated billions of dollars in U.S. tax losses.

In July 2014 the U.S. Senate Permanent Subcommittee on Investigations accused Deutsche Bank and Barclays of helping hedge funds use dubious financial products to avoid paying more than $6 billion in taxes.

In December 2014 federal prosecutors brought suit alleging that Deutsche Bank had fraudulently used shell companies to evade taxes on a transaction that had taken place in 2000. The suit claimed that the bank owed the federal government $190 million in taxes, penalties and interest.

Dealing in Toxic Securities

In 2011 the Financial Services Authority fined Deutsche Bank’s DB Mortgages unit £840,000 for “irresponsible lending practices and unfair treatment of customers in arrears”; the agency also secured redress of approximately £1.5 million for DB Mortgages’ customers.

That same year, a German appeals court ruled that Deutsche Bank had to compensate a small-business customer for losses incurred as the result of an interest-rate swap. The court concluded that the bank had a “grave conflict of interest” in its dealings with the customer.

Also in 2011, the Federal Housing Finance Agency sued Deutsche Bank and other firms for abuses in the sale of mortgage-backed securities to Fannie Mae and Freddie Mac (the case was settled for $1.9 billion in late 2013).

In 2012 U.S. Attorney for the Southern District of New York announced that Deutsche Bank would pay $202.3 million to settle charges that its MortgageIT unit had repeatedly made false certifications to the U.S. Federal Housing Administration about the quality of mortgages to qualify them for FHA insurance coverage.

In late 2012 and early 2013 there were reports that Deutsche Bank was being investigated by U.S. prosecutors for violating sanctions against doing business with countries such as Iran and by prosecutors in several countries for participating in the efforts to manipulate the LIBOR interest rate index.

At the same time, German authorities were stepping up an investigation of the bank’s role in tax evasion linked to carbon credits. Deutsche Bank’s offices were raided by prosecutors in late 2012 as part of the probe.

In January 2013 Deutsche Bank agreed to pay a $1.5 million fine to the U.S. Federal Energy Regulatory Commission to settle charges that it had manipulated energy markets in California in 2010.

In February 2013 the bank had to delay the publication of its annual report and call an extraordinary shareholder meeting to respond to challenges by shareholders angry about the company’s legal problems.

In March 2013 Massachusetts fined Deutsche Bank $17.5 million for failing to inform investors of conflicts of interest during the sale of collateralized debt obligations.

In December 2013 Deutsche Bank was fined $983 million by the European Commission for LIBOR manipulation. Later, in April 2015, it had to agree to pay $2.5 billion to settle LIBOR allegations brought by U.S. and UK regulators.

In February 2014 Deutsche Bank agreed to pay the equivalent of about $1 billion to settle a longstanding lawsuit in which the bank had been accused of contributing to the collapse of the Kirch media group in Germany.

In December 2014 FINRA fined Deutsche Bank Securities $4 million as part of a case against ten investment banks for allowing their stock analysts to solicit business and offer favorable research coverage in connection with a planned initial public offering of Toys R Us in 2010.

In May 2015 the SEC announced that Deutsche Bank would pay $55 million to settle allegations that it overstated the value of its derivatives portfolio during the height of the financial meltdown.

The following month, co-chief executives Anshu Jain and Jurgen Fitschen unexpectedly resigned, reportedly under pressure from German regulators unhappy with the way they handled the investigation into alleged manipulation of benchmark interest rates by bank employees.

In November 2015 the investigation of Deutsche Bank’s sanction violations resulted in payments of $200 million to New York State regulators and $58 million to the Federal Reserve.

In December 2016 Deutsche Bank agreed to pay a total of $37 million to settle allegations by the SEC and the New York Attorney General that it mislead clients about order routing.

In January 2017 the bank reached a $7.2 billion settlement of a Justice Department case involving the sale of toxic mortgage securities during the financial crisis. Deutsche Bank reneged on the DOJ settlement a few short months later but there was no fanfare or public outcry. It simply went ‘unnoticed’.

That same month, Deutsche Bank was fined $425 million by New York State regulators to settle allegations that it helped Russian investors launder as much as $10 billion through its branches in Moscow, New York and London.

In March 2017 Deutsche Bank subsidiary DB Group Services (UK) Limited was ordered by the U.S. Justice Department to pay a $150 million criminal fine in connection with LIBOR manipulation.

The following month, the Federal Reserve fined Deutsche Bank $136.9 million for interest rate manipulation and $19.7 million for failing to maintain an adequate Volcker rule compliance program.

Shortly thereafter, the Fed imposed another fine, $41 million, for anti-money-laundering deficiencies. In October 2017 Deutsche Bank paid $220 million to settle multistate litigation relating to LIBOR.

In 2018 Deutsche Bank paid a total of $100 million to the Commodity Futures Trading Commission–$70 million for interest-rate manipulation and $30 million for manipulation of metals futures contracts.

Deutsche Banks’ Stefan Simon plays a side role as “Heinrich”, a German concentration camp commander, in the short movie “Dirty Bomb”

Other Information Sources

Violation Tracker summary page

Watchdog Groups and Campaigns

Americans for Financial Reform

Banks and Human Rights

BanksterUSA

BankTrack

Campaign for a Fair Settlement

Demos

Deutsche Bank Risk Alert (site maintained by the union UNITE HERE, which represents workers at Deutsche Bank-owned casinos in Las Vegas)

Friends of the Earth Europe

Global Witness

Inner City Press

Public Citizen

Rainforest Action Network

Service Employees International Union

SOMO

Tax Justice Network

U.S. PIRG

Key Books and Reports

A Big Deal? Corporate Social Responsibility and the Finance Sector in Europe (CORE Coalition, December 2005).

Abuse of Structured Financial Products (Senate Permanent Subcommittee on Investigations,July 2014).

Dirty Profits 2: Report on Companies and Financial Institutions Benefiting from Violations of Human Rights (Facing Finance, 2013).

Dividend Tax Abuse: How Offshore Entities Dodge Taxes on U.S. Stock Dividends (Senate Permanent Subcommittee on Investigations, September 2008).

Farming Money: How European Banks and Private Finance Profit from Food Speculation and Land Grabs (Friends of the Earth Europe, January 2012).

Financing Food: Financialisation and Financial Actors in Agriculture Commodity Markets (SOMO, April 2010).

Investing Responsibly: A Financial Puzzle (SOMO, September 2010).

Undue Diligence: How Banks Do Business with Corrupt Regimes (Global Witness, March 2009).

Last updated August 3, 2019

Press Release

January 30, 2017

Contact: Richard Loconte, 212-709-1691

DFS FINES DEUTSCHE BANK $425 MILLION FOR RUSSIAN MIRROR-TRADING SCHEME

The Bank Allowed Traders to Engage in a Money-Laundering Scheme Using “Mirror Trades” That Improperly Shifted $10 Billion Out of Russia

DFS Directs Bank to Hire an Independent Monitor to Review and Report on Its Existing Compliance Programs, Policies and Procedures

Financial Services Superintendent Maria T. Vullo today announced that Deutsche Bank AG and its New York branch will pay a $425 million fine and hire an independent monitor as part of a consent order entered into with the New York State Department of Financial Services (DFS) for violations of New York anti-money laundering laws involving a “mirror trading” scheme among the bank’s Moscow, London and New York offices that laundered $10 billion out of Russia. DFS’s investigation found that the bank missed numerous opportunities to detect, investigate and stop the scheme due to extensive compliance failures, allowing the scheme to continue for years. DFS worked closely on the investigation with the Financial Conduct Authority.

“In today’s interconnected financial network, global financial institutions must be ever vigilant in the war against money laundering and other activities that can contribute to cybercrime and international terrorism,” Superintendent Vullo said. “This Russian mirror-trading scheme occurred while the bank was on clear notice of serious and widespread compliance issues dating back a decade. The offsetting trades here lacked economic purpose and could have been used to facilitate money laundering or enable other illicit conduct, and today’s action sends a clear message that DFS will not tolerate such conduct. DFS is pleased to work with the Financial Conduct Authority on this matter. We also appreciate the bank’s forthrightness and timeliness in conducting its internal review and cooperation in our investigation.”

In addition to today’s action, Superintendent Vullo has led DFS enforcement actions for violations of AML laws against Intesa Sanpaolo S.p.A., which was fined $235 million; Agricultural Bank of China, which was fined $215 million; and Mega Bank of Taiwan, which was fined $185 million.

Today’s action further highlights the importance of DFS’s new risk-based anti-terrorism and anti-money laundering regulation, which became effective on January 1, 2017. DFS’s regulation requires regulated institutions to maintain programs to monitor and filter transactions for potential BSA/AML violations and prevent transactions with sanctioned entities. It also requires regulated institutions to submit an annual board resolution or senior officer compliance finding confirming the steps taken to ascertain compliance with the regulation. In addition, DFS has proposed a first-in-the-nation cybersecurity regulation, which will be effective March 1, 2017, requiring DFS regulated institutions to establish and maintain a cybersecurity program designed to protect consumers and ensure the safety and soundness of New York’s financial services industry.

DFS found that Deutsche Bank and several of its senior managers missed key opportunities to detect, intercept and investigate a long-running mirror-trading scheme facilitated by its Moscow branch and involving New York and London branches. Operating through the equities desk at Deutsche Bank’s Moscow branch, certain companies that were clients of the Moscow equities desk issued orders to purchase Russian blue chip stocks, always paying in rubles. Shortly thereafter, sometimes on the same day, a related counterparty would sell the identical Russian blue chip stock in the same quantity and at the same price through Deutsche Bank’s London branch. The counterparties involved were always closely related, often linked by common beneficial owners, management or agents. The trades were routinely cleared through the bank’s Deutsche Bank Trust Company of the Americas (DBTCA) unit. The selling counterparty was typically registered in an offshore territory and would be paid for its shares in U.S. dollars. At least 12 entities were involved, and none of the trades demonstrated any legitimate economic rationale.

DFS’s investigation uncovered violations that included the following:

• The bank has conducted its banking business in an unsafe and unsound manner, failing to maintain an effective and compliant anti-money laundering program. The bank failed to maintain and make available true and accurate books, accounts and records reflecting all transactions and actions.
• When contacted by a European financial institution about contradictory information about one of the companies involved in the trading scheme, a senior compliance employee who supervised special investigations at the DBTCA never responded. In addition, the senior compliance employee did not take any steps to investigate the basis for the European Bank’s inquiry, later explaining that the employee had “too many jobs” and “had to deal with many things and had to prioritize.”
• The bank’s Know Your Customer (KYC) processes were weak, functioning merely as a checklist with employees mechanically focused on ensuring documentation was collected, rather than shining a critical light on information provided by potential customers. Virtually all of the KYC files for the companies involved in the scheme were insufficient, and a Moscow employee who oversaw the illicit mirror trading was also actively involved in the onboarding and KYC documentation of companies involved in the scheme. In addition, certain staff members experienced hostility and threats on several occasions when it appeared they had not moved quickly enough to facilitate transactions.
• The bank failed to accurately rate its country and client risks for money laundering throughout the relevant time period and lacked a global policy benchmarking its risk appetite, resulting in material inconsistencies and no methodology for updating the ratings. Deutsche Bank was not in line with peer banks, which rated Russia as high risk well before Deutsche Bank did in late 2014.
• The bank’s anti-financial crime, AML and compliance units were ineffective and understaffed. A senior compliance staffer repeatedly stated that he had to “beg, borrow, and steal” to receive appropriate resources, leaving existing personnel scrambling to perform multiple roles. At one point, an attorney who lacked any compliance background served as the Moscow branch’s head of compliance, head of legal, and as its AML Officer – all at the same time.

Within 60 days of the consent order, the bank must engage an independent monitor, approved by DFS, to conduct a comprehensive review of the bank’s existing BSA/AML compliance programs, policies and procedures that pertain to or affect activities conducted by or through its DBTCA subsidiary and the New York branch.

Within 30 days of the selection of the independent monitor, the bank, DBTCA and the New York branch must submit to DFS for approval an engagement letter than provides for the independent monitor to review and report on, among other things:

• The elements of the bank’s corporate governance that contributed to or facilitated the improper conduct and permitted it to go on;
• Relevant changes or reforms to corporate governance that the bank has made since the time of the improper conduct and whether those changes or reforms are likely to significantly enhance the bank’s BSA/AML compliance going forward; and
• The thoroughness and comprehensiveness of the bank’s current global BSA/AML compliance programs.

In addition, the bank must submit a written action plan to improve and enhance its current global BSA/AML compliance programs that pertain to or affect activities conducted by or through DBTCA and the New York Branch.

A copy of the consent order can be found here.

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4 more years…. https://t.co/XstJlLACGZ pic.twitter.com/eNyECBZlGf

— LawsInTexas (@lawsintexasusa) August 30, 2020