Deutsche Bank E-Mails Showed `Tricks' That Led to U.S. Pact

  • Bank agrees to fire six employees over violations in 1999-2006
  • Regulators say sanction controls skirted on $10.8 billion

Deutsche Bank AG will pay $258 million and fire six employees to resolve a probe into sanctions violations from 1999 to 2006 after a string of e-mails showed employees discussed the “tricks” used to move money in and out of Iran, Libya, Syria, Burma and Sudan.

The settlement was announced Wednesday by the Federal Reserve and New York’s Department of Financial Services. The deal shows how authorities combed through the bank’s internal messages and singled out bad actors to broker a deal. They also show how the bank’s European arm kept U.S. staff in the dark, and some employees even told customers they were skirting U.S. law, according to a statement by Anthony Albanese, the acting superintendent of the DFS.

“We are pleased that Deutsche Bank worked with us to resolve this matter and take action against individual employees who engaged in misconduct,” Albanese said. “To truly deter future wrongdoing, it is important to focus not just on corporate accountability, but also individual accountability.”

Renee Calabro, a Deutsche Bank spokeswoman in New York, said the conduct ceased “several years ago” and the bank has since ended all business with the countries involved.


The bank used “non-transparent methods” on more than 27,000 dollar-clearing transactions valued at more than $10.8 billion, DFS said.

Many of those methods were spelled out over e-mail -- including discussions of not putting everything in writing, DFS’s examples of internal correspondence showed.

One non-U.S. relationship manager who asked for advice about U.S. dollar processing was told that information on “OFAC-safe business patterns” is confidential. “Compliance does not want us to distribute such info to third parties, and forbids us explicitly to do so in any written or electronic form,” the person wrote in an e-mail, according to DFS’s statement. The Office of Foreign Asset Controls enforces U.S. economic and trade sanctions.

Another memo cautioned, “As usual, let’s not revert to the client in writing due to the reputational risk involved if the e-mail goes to wrong places. Someone should call [the client] and tell them orally and ensure that the conversation is not taped.”

Redoubled Efforts

European employees actively hid information from U.S. colleagues and redoubled their efforts when questioned, Albanese said.

Techniques used included wire stripping, or removing information that identified a link to a sanctioned country on payment messages, and creating a second version of messages that kept information out of U.S. hands, DFS’s statement said.

The bank also processed transactions manually, and told some customers that extra fees associated were to help circumvent U.S.-based sanction controls, prosecutors said. “During site visits, in e-mails, and during phone calls, clients were instructed to include special notes or code words in their payment messages” to avoid problems, DFS said.

Under the agreement, New York will collect $200 million, while the Fed will get $58 million. The bank will also install an independent monitor, DFS said. Aside from the six fired employees, three others will be banned from duties involving U.S. operations.

Global Banks

More than 10 other global banks have resolved claims in recent years that they violated U.S. sanctions laws against Iran and other blacklisted nations -- in many cases, with penalties dwarfing Deutsche Bank’s. Earlier this year, Commerzbank AG, Germany’s second-largest lender, paid $1.45 billion to settle claims it broke sanctions and money-laundering laws. Last year, BNP Paribas SA paid almost $9 billion and pleaded guilty to violating sanctions laws.

A spokeswoman for Manhattan District Attorney Cyrus R Vance Jr. , whose office has played a role in many of those settlements, declined to comment on whether he is investigating Deutsche Bank.

The pact resolves one of many legal issues for the Frankfurt-based bank. Deutsche Bank has also disclosed an inquiry into whether it colluded to rig benchmark foreign-exchange rates and an investigation into potential manipulation of precious-metals prices. U.S. prosecutors are also investigating its dealings in mortgage- and asset-backed securities.

The New York banking regulator, the Justice Department and the U.K.’s Financial Conduct Authority also are investigating whether Deutsche Bank’s Moscow office properly vetted as much as $6 billion in Russian transactions, people familiar with the matter have said. The bank is conducting its own review of the transactions, which are sometimes referred to as “mirror trades.”

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