The New York State Department of Financial Services (DFS) imposed $150 million in penalties on Deutsche Bank due to “significant compliance failures” related to its dealings with the late billionaire and sex offender Jeffrey Epstein.
The penalty is also in connection with Deutsche Bank’s relationships with Danske Bank Estonia and FBME Bank.
Deutsche Bank knows about Epstein’s “terrible criminal history”
According to DFS Superintendent Linda Lacewell, the German investment bank and financial services company agreed to pay the $150 million in penalties under a Consent Order.
In a statement, Lacewell said Deutsche Bank “failed to adequately monitor” the activities of its customer,s including Epstein, whom it considers to be high risk.
In Epstein’s case, the DFS determined that Deutsche Bank failed to properly monitor transactions that were conducted on his behalf despite its knowledge of his “terrible criminal history.”
According to the New York State regulator, Deutsche Bank “processed hundreds of transactions totaling millions of dollars that should have prompted additional scrutiny” since Epstein is a registered sex offender. Such transactions include:
- Payments to individuals who were publicly alleged to have been Mr. Epstein’s co-conspirators in sexually abusing young women.
- Settlement payments totaling over $7 million, as well as dozens of payments to law firms totaling over $6 million for what appear to have been the legal expenses of Mr. Epstein and his co-conspirators.
- Payments to Russian models, payments for women’s school tuition, hotel and rent expenses, and (consistent with public allegations of prior wrongdoing) payments directly to numerous women with Eastern European surnames.
- Periodic suspicious cash withdrawals — in total, more than $800,000 over approximately four years.
Deutsche Bank’s failures related to its foreign bank clients
The DFS also determined that “Deutsche Bank failed to monitor the activities of its foreign bank clients, Danske Estonia and FBME, with respect to their correspondent and dollar clearing business.”
The New York State regulator noted that Danske Estonia is “at the center of one of the world’s largest money-laundering scandals” and Deutsche Bank placed it on its “highest possible risk rating.”
However, the German investment bank and financial services company “failed to take appropriate action to prevent Danske Estonia from transferring billions of dollars of suspicious transactions through Deutsche Bank accounts in New York.”
With regard to FBME, the DFS said Deutsche Bank’s relationship represented a similar “failure to act on red flags concerning a correspondent banking relationship with a foreign bank.”
The German investment bank and financial services company also considered FBME as a high-risk client that required annual enhanced anti-money checks.
FBME failed to improve the quality of its controls over several years. Its failures prompted the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to order all banks operating in the country to stop doing business with it.
In a message to Deutsche Bank staff regarding the Consent Order, the company’s CEO Christian Sewing said, “Today serves as a reminder of how vigilant we must remain. It not only marks the anniversary of our ‘Compete to Win’ strategy but also our settlement just announced with the New York Department of Financial Services (DFS), resolving investigations into our controls and processes in the fight against financial crime.”
Sewing said the settlement with DFS resolves three issues involving Danske Bank, the Federal Bank of the Middle East, and our former business relationship with Jeffrey Epstein. He added that it was a “critical mistake” taking Epstein as a client in 2013.