By Stephen Rae for AMLi
DEUTSCHE Bank has been forced to pay more than $130M to end criminal and civil actions by US authorities for paying bribes on three continents.
New York investigators uncovered corrupt payments to win contracts in countries such as Saudi Arabia, Italy, UAE and China.
The investigations led by the US Justice Department and the Securities and Exchange Commission (SEC) discovered how Deutsche Bank executives signed off on about $7M in improper payments to foreign fixers between 2009 and 2016. The bribes resulted in the bank earning around $35M from the subsequent contracts.
By paying the $130M Deutsche has avoided criminal convictions and the embarrassment of a prolonged trial which would drag the bank’s name through weeks of media coverage.
Instead the banking giant has entered into a deferred prosecution agreement with the Justice Department. This fine also resolves the civil component of the investigation by the SEC.
The settlements are the latest scandal to mire Deutsche Bank, which has been repeatedly penalised in recent years by federal prosecutors and regulators in the US for its involvement with money laundering and for violating international sanctions. Deutsche also has the dubious reputation as Donald Trump’s favourite bank – although me recent reports indicate the German based institution is anxious to shed him as a customer.
“Deutsche Bank engaged in a seven-year course of conduct, during which it failed to implement a system of internal accounting controls regarding the use of company funds and falsified its books and records to conceal corrupt and improper payments,” said Acting Deputy Assistant Attorney General Robert Zink of the Justice Department’s Criminal Division.
“Separately, Deutsche Bank traders on three continents sought to manipulate our public financial markets through fraud for five years. This resolution exemplifies the department’s commitment to help ensure that publicly traded companies devise and implement appropriate and proper systems of internal accounting controls and maintain accurate and truthful corporate documentation,” he said.
The stated Acting US Attorney Seth D. DuCharme of the Eastern District of New York said: “Deutsche Bank engaged in a criminal scheme to conceal payments to so-called consultants worldwide who served as conduits for bribes to foreign officials and others so that they could unfairly obtain and retain lucrative business projects.”
“This office will continue to hold responsible financial institutions that operate in the United States and engage in practices to facilitate criminal activity in order to increase their bottom line,” the Acting US Attorney added.
The resolution includes criminal penalties of $85,186,206, criminal disgorgement of $681,480, victim compensation payments of $1,223,738, and $43,329,622 to be paid to the SEC.
“We take responsibility for these past actions, which took place between 2008 and 2017,” said Dan Hunter, the bank’s US head of communications. “Our thorough internal investigations, and full cooperation with the DOJ and SEC investigations of these matters, reflect our transparency and determination to put these matters firmly in the past.”
Authorities said the bank failed to closely monitor the arrangements it had made with the consultants to determine if they had close ties to foreign officials, even though the bank had identified problems with its use of consultants in 2009.
Deutsche Bank was found to have paid consultants “where no invoices were submitted and where invoices contained insufficient documentation to detail what services were performed.” Others were paid in excess of what their contracts called for, or were paid even though they had no contract at the time.
In one case in an effort to win business from the family office of an unidentified Saudi official, Deutsche Bank had entered into a contract with a corporate entity owned by the wife of the person who made investment decisions for the family office. The bank then paid fees to that company — describing them in the bank’s records as “referral fees.”
Describing the bribes that way was a violation of the accounting provisions of the federal Foreign Corrupt Practices Act, prosecutors found.
Separately, in Italy the bank struck up a business development relationship with a judge, according federal authorities. And in China, where Deutsche Bank wanted to set up an energy fund with a government entity, the bank found a consultant who was a close friend of a government official, the SEC found.
The bank’s agreement with federal prosecutors also resolved allegations arising from an investigation into manipulative commodities trading by some at the bank.
Meanwhile, the New York Times also reports that prosecutors discovered several Deutsche traders had engaged in a practice known as “spoofing” — placing an order to buy or sell commodities with the intent of cancelling it before the trade can be completed. This can allow the traders to profit when others are deceived into making trades based on the misleading information.