Federal and New York authorities said Wednesday that Deutsche Bank will pay $258 million and fire six senior employees to resolve investigations into thousands of illegal transactions with customers in Iran, Libya, Syria, Myanmar, and Sudan.
The German bank will pay $200 million to the New York State Department of Financial Services and $58 million to the Federal Reserve.
Deutsche Bank agreed to appoint an independent monitor as part of the settlement.
From at least 1999 through 2006, the New York regulator said,
Deutsche Bank used non-transparent methods and practices to conduct more than 27,200 U.S. dollar clearing transactions valued at over $10.86 billion on behalf of Iranian, Libyan, Syrian, Burmese, and Sudanese financial institutions and other entities subject to U.S. economic sanctions, including entities on the Specially Designated Nationals (“SDN”) List of the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”).
Bank employees knew about the OFAC restrictions but found ways to circumvent them for “lucrative” U.S. dollar business for sanctioned customers, the New York agency said.
The bank stripped or altered payment information for dollar transactions to remove details about underlying parties and countries involved.
Employees used “special processing” to handle sanctioned payments to avoid triggering suspicions in the U.S., the New York DFS said.
When some customers were charged more for the “special processing,” the bank told them manual handling of their transactions was necessary to avoid the sanctions.
Sanctioned customers were warned that “it is essential for you to continue to include [the note] ‘Do not mention our bank’s name…’ in . . . payments that may involve the USA.”
Deutsche Bank touted its “OFAC-safe” procedures to customers and said it had more expertise avoiding sanctions than Asian banks.
The New York Department of Financial Services said:
[S]ome evidence indicates that at least one member of the Bank’s Management Board was kept apprised about and approved of the Bank’s business dealings with customers subject to U.S. sanctions.
Bank employees prepared a training manual for newly-hired payments staff in an overseas office. The manual included a section titled “U.S. Embargo Payments” that explained how to handle payments with a sanctions connection.
An early draft included a warning, in bold text: “Special attention has to be given to orders in which countries/institutes with embargos are involved. Banks under embargo of the U.S. (e.g., Iranian banks) must not be displayed in any order to [Deutsche Bank New York] or any other bank with American origin as the danger exists that the amount will be frozen in the USA.”
Six employees involved in the sanctions violations still work for Deutsche Bank. The New York DFS said “it ordered the bank to terminate those six employees.”
They included a managing director in global transactions banking, a managing director in operations, a director in operations, a director in corporate banking and securities, a vice president in global transactions banking, and a vice president/relationship-manager.
Three other Deutsche Bank employees were banned by Wednesday’s enforcement action “from holding any duties, responsibilities, or activities involving compliance, U.S. dollar payments, or any matter relating to U.S. operations,” the NYDFS said.
The agency said several other employees involved in the illegal business had already left the bank.
Last month, French bank Crédit Agricole paid $787 million after violating U.S. sanctions against Sudan, Iran, Myanmar, and Cuba between 2003 and 2008.
In May this year, another French bank, BNP Paribas S.A., paid $9 billion after pleading guilty to violating U.S. sanctions against Sudan, Iran, and Cuba.
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The New York State Department of Financial Services Consent Order In the Matter of Deutsche Bank AG and Deutsche Bank AG New York Branch is here (pdf).
The Board of Governors of the Federal Reserve System Consent Order In the Matter of Deutsche Bank AG is here (pdf).
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.