The Commodity Futures Trading Commission (CFTC) filed a civil complaint Thursday in federal district court in New York City charging Deutsche Bank AG with failing to report any swap data for multiple asset classes for five days in April when a software update went wrong and crashed the system.
The CFTC asked for unspecified financial penalties.
The agency also charged the bank with failing to supervise its employees responsible for swap data reporting, not correcting inaccurate filings, having an inadequate Business Continuity and Disaster Recovery Plan, and violating a prior CFTC Order.
Deutsche Bank has already agreed to appoint a reporting compliance monitor. The CFTC said Deutsche Bank still isn’t in full compliance with reporting requirements.
On April 16, Deutsche Bank scheduled a series of updates on its regular swap data reporting platform (Main Platform).
To run the updates, Deutsche Bank switched from the Main Platform to its backup platform, the so-called Disaster Recovery Platform.
After switching to the Disaster Recovery Platform, Deutsche Bank discovered that certain files on that platform were corrupt.
At that point, Deutsche Bank switched back to the Main Platform. But the corrupted files transferred from the Disaster Recovery Platform to the Main Platform.
“As a result,” the CFTC said, “the corrupted files shut down the reporting for multiple asset classes from both the Main Platform and the Disaster Recovery Platform.”
The CFTC said Deutsche Bank’s Business Continuity and Disaster Recovery Plan didn’t prevent the system outage and also prolonged the crash for five days.
Deitsche Bank didn’t resume swap data reporting until April 21.
The CFTC said,
Deutsche Bank could not implement the Disaster Recovery Plan at all in response to the System Outage because the first step in the Disaster Recovery Plan required switching from the Main Platform to the Disaster Recovery Platform, which housed the corrupt files, and initiated the failure.
Even before the computer crash, Deutsche Bank was under a CFTC order for swap reporting violations it committed from January 2013 through July 2015.
There were “between tens of thousands and hundreds of thousands of reporting violations in Deutsche Bank’s swap data reporting during that time period,” the CFTC said.
Deutsche Bank paid a civil penalty of $2,500,000 to settle the 2015 enforcement action and agreed to fix its swap reporting functions. It didn’t admit or deny liability.
CFTC enforcement director Aitan Goelman said Thursday: “Deutsche Bank has shown over the last year its inability to comply with its swap reporting responsibilities under the Commodity Exchange Act and CFTC Regulations.”
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The CFTC’s civil complaint filed on August 18, 2016 in the U.S. District Court for the Southern District of New York in U.S. v. Deutsche Bank AG (No.1:16-cv-6544) is here (pdf).
Richard L. Cassin is the publisher and editor of the FCPA Blog. He’ll be the keynote speaker at the FCPA Blog NYC Conference 2016.