Deutsche Bank ditched Hertha Berlin as a client over the Bundesliga football club’s links to financier Lars Windhorst, after a series of scandals forced the German lender to step up its compliance regime.
The bank took the decision last year, according to four people familiar with the matter, after the Financial Times reported that Windhorst was under investigation by Berlin prosecutors over potential violations of the country’s banking act following a criminal complaint by German financial watchdog BaFin. The last Hertha account at Deutsche was closed recently, the people added.
The move was a result of Deutsche’s tightened anti-money-laundering controls, two of the people told the FT.
Deutsche was under pressure following public rebukes by the regulator over scandals including its belated reporting of suspicious transactions processed for Danske Bank’s Estonian branch and its acceptance of disgraced financier Jeffrey Epstein as a client.
In an unprecedented move in 2018, BaFin mandated a special monitor to supervise the implementation of the improvements it had demanded.
Deutsche subsequently stepped up its controls and invested heavily in better monitoring and more staff. It also became more selective over its clients. Stefan Simon, the bank’s chief administrative officer, told the FT last year that Deutsche had severed relationships with “a very small number” of wealthy clients with criminal records in the wake of the Epstein scandal.
Hertha, a top-tier football club founded in 1892 that was one of the 16 founding members of the Bundesliga, had been a longstanding corporate banking client.
Windhorst, who in 2010 was convicted of “breach of trust” by a German court, started to build a stake in the lossmaking club in 2019, eventually acquiring 64.7 per cent for €374mn.
Despite owning a majority stake, Windhorst does not have a say over the day-to-day operation of the club, which under the Bundesliga’s rules is controlled by fans.
Windhorst this month announced that he would terminate his involvement with Hertha following allegations, which he denies, that he had hired corporate spies to try to force out the club’s president.
According to people familiar with the matter, Deutsche told Hertha that its decision to ditch the club was not linked to direct evidence that raised potential issues. However, the bank pointed out that the additional measures required to monitor the transactions were too cumbersome and did not justify the revenue generated with the club.
Months before Deutsche decided last year to not do business with Hertha, Windhorst was courting the German lender as he was keen to receive loans for his portfolio companies, according to two people familiar with the matter.
While Windhorst believed that big banks would be more willing to transact with him because a German criminal conviction he received in 2010 had been expunged from the official record after 10 years, Deutsche rebuffed his overtures.
People familiar with the matter told the FT that Windhorst around that time also met Deutsche chief executive Christian Sewing at least once, and exchanged various WhatsApp messages with him.
The use of non-monitored communication is forbidden by the bank’s code of conduct and regulatory rules, and Deutsche was one of several banks that were fined $200mn this year by US regulators for failing to monitor employees’ communications on unauthorised messaging apps. It is unclear whether Sewing’s messages with Windhorst were part of the US regulatory probe as Windhorst himself was never a client and people familiar with the matter said their content was not business-related.
Sewing and Deutsche’s nine other most senior executives this year voluntarily waived €75,000 each in variable pay to show management was bearing some blame for the use of unapproved communications platforms.
Hertha declined to comment. Deutsche said it did not “comment on actual or potential client relationships [nor] on when, how and with whom our managers communicate”.
A spokesperson for Windhorst’s Tennor Holding said the financier did not have knowledge of Hertha’s banking relationships and could not comment on that. The spokesman added that Windhorst did not discuss the “business activities of Deutsche Bank” with Sewing on WhatsApp, and declined to comment further.