- Deutsche Bank Russian equity probe finds policy `violations'
- Deutsche Bank also being sued for rigging U.S. bond market
Deutsche Bank AG increased its litigation reserves by 1.21 billion euros ($1.3 billion) in the third quarter, mainly to cover suspected wrongdoing at the lender’s Russian equity unit.
The firm said Thursday it found violations of internal policies and identified weaknesses in its oversight regime during its probe into the so-called mirror trades, which may have allowed Deutsche Bank’s Russian clients to move funds out of the country without properly alerting authorities.
“We can’t say much because we don’t know much and that’s shame on us,” co-Chief Executive Officer John Cryan said at an investor conference in London. “It looks as though the bank was used.”
The U.S. Justice Department and authorities in the U.K. and Russia are investigating whether Germany’s biggest bank adequately vetted $6 billion in transactions that were part of a possible money-laundering scheme, people with knowledge of the matter said earlier this year.
The Russian investigation adds to a long list of legal woes facing Deutsche Bank, which has been buffeted by multiple probes, the departure of several top executives and allegations that senior officials were aware of traders’ efforts to rig markets.
The bank said it would invest in anti-money-laundering infrastructure and look at “exiting relationships and locations with unacceptable risks.” Deutsche Bank reiterated that it has already taken disciplinary action against a number of people in connection with its internal probe of the Russian trades.
The investigation “has identified certain violations of Deutsche Bank’s policies and deficiencies in Deutsche Bank’s control environment,” the company said in its quarterly earnings statement. It’s the first time the bank has said internal rules were broken.
The bank has been “advised that it’s not our job to try and find out where the money comes from or where it goes to,” Cryan told reporters in Frankfurt earlier Thursday.
Bloomberg News reported earlier this month that several close associates of Russian President Vladimir Putin may have benefited from the Deutsche Bank trades. Some of the accounts under scrutiny appear to contain assets that belong to Putin associates, according to people familiar with the investigation. They include a relative of the president and two of his longtime friends, Arkady and Boris Rotenberg, who grew rich from contracts with state-run firms and who are now under U.S. sanctions, the people said.
Separately, the bank said it has been named as a defendant in several putative class action lawsuits in the U.S. alleging that it had manipulated the U.S. government bond market.
The firm has yet to settle investigations into its role in manipulating currency markets, lawsuits relating to U.S. mortgage-backed securities and a probe into whether the company broke U.S. trade sanctions against certain countries. Deutsche Bank said it is cooperating with regulators in all those matters.