US probing Deutsche Bank over money laundering and Trump

London/New York — US congressional investigators have identified possible failures in Deutsche Bank’s money-laundering controls in its dealings with Russian oligarchs, after the lender handed over a trove of transaction records, e-mails and other documents, three people familiar with the matter said.

The congressional inquiry found instances when Deutsche Bank staff in the US and elsewhere flagged concerns about new Russian clients and transactions involving existing ones, but were ignored by managers, two of the people said.

MPs are also examining whether Deutsche Bank facilitated the funneling of illegal funds into the US as a correspondent bank, where it processes transactions for others, one of the sources said.

The congressional probe, whose initial findings have not been previously reported, is at an early stage, and it is not yet clear whether it will lead to any action against the bank, the three sources said.

A Deutsche Bank spokesperson, Troy Gravitt, said the bank cannot comment on the work of the congressional committees but remains committed to co-operating with authorised investigations. Addressing past deficiencies in the bank’s controls, the spokesperson said: “We have worked to address them, taken disciplinary measures with regards to certain individuals and reviewed our client onboarding and monitoring processes.”

The US House of Representatives financial services committee declined to comment.

The Democrat-controlled House began examining possible money laundering in US property deals involving President Donald Trump, a Republican, earlier this year. The law makers are also looking into whether Trump’s dealings left him subject to the influence of foreign individuals or governments.

The White House and a Trump Organisation spokesperson, Amanda Miller, did not respond to requests for comment.

Deutsche Bank has been drawn into the inquiry as Trump’s biggest lender and submitted documents to investigators in response to a subpoena. The stakes are high for the German lender, which is trying to engineer a turnaround under CEO Christian Sewing after a multi-year bet on building a global investment banking business unraveled.

Graham Barrow, a financial crime consultant, said that while the bank has since sought to reform, it had taken too many risks in countries such as Russia. “The bank decided to go for becoming a global investment bank. They were compromised.”

Deutsche Bank declined to comment on Barrow’s view.

In 2017, Deutsche Bank agreed to pay regulators in the US and Britain $630m in fines for organising $10bn in sham trades that could have been used to launder money out of Russia. Two of the sources said that the preliminary findings of the congressional investigators may have some overlap with that case but also include lapses unrelated to that matter.

New evidence thrown up by the congressional probe could feed into further investigations by other authorities, regulatory experts said.

If evidence of wrongdoing is found, it could also harm the bank’s efforts to strengthen its relationships with US regulators and deter investors concerned about the possibility of future regulatory sanctions. Deutsche Bank’s shares hit an all-time low last month.

Congressional subpoena

Earlier this year, the House financial services committee served a 12-page subpoena on Deutsche Bank. Reuters has seen a version with portions blacked out.

Law makers requested documents that identify “any financial relationship, transactions, or ties” between Trump, his family members and his companies and “any foreign individual, entity, or government”, according to the subpoena.

It also asks for hundreds of documents relating to other bank clients, including Russian oligarchs, the three sources said. These documents include account applications, know-your-client money-laundering cheques, internal assessments of “suspicious activity”, as well as information about loans and mortgages, according to the subpoena.

Although Trump has challenged the release of his banking records in court, in April Deutsche started handing over information that is not directly related to the president and is continuing to do so, one of the people said.

That includes material prepared by bank staff for filing so-called suspicious activity reports to the US treasury department and documents about Russian deals circulated among the bank’s management and reputational risk committee, one person said.

The bank has also assembled a large amount of the subpoenaed Trump material, pending the court’s decision on whether it should be released, the three people said.

The House financial services committee will continue its investigation of Deutsche Bank’s money-laundering processes regardless of whether the court rules the lender should hand over the Trump documents to investigators, three sources familiar with the investigation said.

Reuters