Deutsche Bank Struggling to Contain Money Laundering Shortfalls

A year after being fined yearly $700 million for allow money laundering, Germany’s Deutsche Bank reportedly still can’t fully link clients to the source of their cash after confidential reviews of investment bank customer files in several countries, including Russia.

Citing internal documents it had seen, the news agency Reuters reported on the money laundering safeguard shortfalls in Germany’s biggest lender that also were said to show it is still fine-tuning procedures to identify clients and income origins, hampered by a lack of staff.

A 13-page June report shared with the European Central Bank (ECB) showed there was a pass rate of zero in countries such as Russia, Ireland, Spain, Italy and South Africa when it checked how client files had been processed.

The pass rate measures the percentage of files that meet the bank’s own Know Your Customer (KYC) standards. Deutsche Bank strives for 95 percent, according to the documents with Hui Chen, a former compliance expert with the US Justice Department telling the news agency the target was generally in line with other global banks.

The bank told Reuters reviews showed its processes were too complex, but said it was making improvements and that overall controls to prevent crimes such as money laundering were effective.  “We still need to improve in terms of internal processes,” it said, when presented with the findings of the reviews.

“What the documents show is that our internal processes are still too complicated,” it said. “So it is not about effectiveness, but about the efficiency of our processes.”

Among the earlier fines was one for $41 million from the US Federal Reserve for failing to have money laundering systems that could detect the problem.

In Russia, the report found problems including a “lack of verification of client address and existence” and a “lack of verification to be able to make an assessment of the client’s source of funds” and whether a client was a “politically exposed person” (PEP) who present a higher risk of bribery or corruption because of their position.

In their 2017 ruling against Deutsche Bank for ‘mirror’ trades, New York financial regulators criticized the lender for “widespread and well-known weaknesses in its KYC processes,” singling out its Russia operations for shoddy standards.

In a written response to Reuters, Deutsche Bank said: “We are not struggling with procedures designed to help prevent criminals from money laundering and other criminal action.

“Our procedures to identify potential anti-money laundering and KYC risks are very effective,” it said of group-wide controls.