Deutsche Bank Cuts Ties to RCB, Cyprus Firm Named in Panama Leakby and
RCB, 46% owned by VTB, allegedly dealt with Putin associates
Person says Panama leak sped process; RCB denies any such link
Deutsche Bank AG is severing ties with the Cypriot lender partly owned by VTB Group that was identified in a media report as arranging as much as $2 billion in offshore transactions linked to associates of Russian President Vladimir Putin.
RCB Bank Ltd., the Cyprus-based lender 46 percent owned by Kremlin-backed VTB, said in an e-mailed statement Friday that Deutsche Bank informed it of the decision on March 21, and that the two firms are continuing their correspondent banking relationship during a transition period. An official for Deutsche Bank declined to comment.
Deutsche Bank was moving to end its relationship with RCB before the Panama Papers report from the International Consortium of Investigative Journalists that mentioned RCB, but the leak led the bank to accelerate the process, according to a person with knowledge of the matter who asked not to be identified because the details are private.
RCB said Friday it “categorically denies” any link between the exit and the so-called Panama Papers leak earlier this week.
RCB Bank “never granted or grants unsecured loans,” CEO Kirill Zimarin said in an interview on Wednesday. Putin’s friend Sergei Roldugin was “never our customer neither in his personal capacity nor as a beneficiary of any company maintaining an account with our bank, and all alleged transactions linked with RCB took place 3 years before any sanction was imposed on Russia. We never created offshore companies for our customers. We strictly followed and follow the requirements of both the legislation and of our regulators which over the past year have become even stricter.”
The leaked files from Mossack Fonseca, a Panama-based law firm that creates shell companies, have prodded regulators into action, rattled politicians and spurred international calls for banking transparency. RCB allegedly offered unsecured loans to Roldugin, according to a report that the chief executive of VTB called “bulls**t” and the Kremlin rejected as attempts to destabilize Russia.
“We were informed about Deutsche Bank’s decision well before the Panama Papers affairs” on March 21, RCB spokesman Michael Maratheftis said in the statement. “We fully respect Deutsche Bank’s decision, thank them for the cooperation and continue to maintain excellent relations with all our corresponding banks.”
Regulators from the U.K. to Switzerland are pressing banks for details of their offshore business dealings as a result of the Panama document leak. Britain’s Financial Conduct Authority sent out letters asking banks and other financial companies to disclose any ties to Mossack Fonseca with an April 15 deadline, a person with knowledge of the matter said.
Correspondent banking relationships are used around the globe to allow lenders to take deposits or make payments on behalf of foreign institutions. RCB lists Deutsche Bank among its correspondent account partners on its website for U.S. dollars and euro transactions, and has other relationships open to clients: Barclays Plc for transactions in British pounds, Credit Suisse Group AG for Swiss francs, Citigroup Inc. for U.S. dollars, Bank of China Ltd. for renminbi and VTB for Russian rubles.
“The audits that RCB has undergone show that it has fully worked in compliance with accepted practice,” VTB head Andrey Kostin said to reporters Thursday. “There are constant checks from the European Central Bank, so it’s impossible to do anything” illegal, he said. VTB declined to comment further and referred queries to RCB.
Barclays, Credit Suisse and Citigroup declined to comment. A spokeswoman for Bank of China in London didn’t immediately respond to requests for comment.
Deutsche Bank started a process of “off-boarding selected clients in areas of higher risk” after reviewing its risk controls, co-Chief Executive Officer John Cryan wrote in a memo to staff on Jan. 28. The Frankfurt-based lender is seeking to improve its controls after taking more than 12 billion euros ($13.6 billion) of charges over the past four years to settle lawsuits and probes into past misconduct.
Among the outstanding matters Deutsche Bank has set aside funds for is a probe into potential money laundering via its Russian unit. The company says it advised regulators of the matter and that the transactions it is reviewing have a “significant” volume. The bank’s investigation has identified violations of its policies as well as deficiencies in its controls. Deutsche Bank is closing its investment-bank operations in the country as part of a plan to improve controls and reduce costs.