Germany’s financial watchdog BaFin has threatened to fine Deutsche Bank if it misses crucial deadlines for fixing its money-laundering controls — the latest escalation of a four-year tussle between lender and regulator.
Bonn-based BaFin on Friday again publicly rebuked the country’s largest bank, highlighting that attempts over a number of years to improve measures against financial crime continued to fall short of expectations.
Deutsche has spent more than €2bn on improving these controls since an unprecedented intervention by BaFin in 2018, when it appointed KPMG as a special monitor and instructed the bank to take action on preventing money laundering and terrorism financing.
The latest directive shows BaFin is still not satisfied and fears Deutsche may miss crucial deadlines falling due in mid-2023. Should they not be met, the regulator was prepared to hand out fines, it said on Friday evening.
The escalating dispute raises questions over chief executive Christian Sewing’s longstanding promises on tackling the bank’s history of compliance and misconduct scandals, and toughening up the lender’s controls.
In 2017, Deutsche agreed to pay $630mn to settle US and UK investigations into the alleged laundering of $10bn of assets by Russian clients. In 2019 and 2020, Frankfurt prosecutors fined the bank for belatedly reporting potentially suspicious transactions, including payments processed on behalf of Danske Bank’s Estonian branch in one of Europe’s largest money-laundering scandals.
Last year, Deutsche restructured its internal operations after it was again rebuked by BaFin, which in April 2021 broadened and extended KPMG’s mandate. The watchdog at the time decreed the bank needed “further appropriate internal safeguards” and urged the lender to tackle shortcomings “in particular with regard to regular customer reviews” but also in its “correspondent [banking] relationships and transaction monitoring”.
Shortly afterwards, Deutsche restructured its internal responsibilities for the matter, putting chief administrative officer Stefan Simon in charge in a wider board reshuffle.
In a brief statement, Deutsche on Friday night said it was “fully aligned with BaFin on the necessary measures” and stressed that “a large proportion” of the necessary steps had been completed. “We have, and will continue, to invest the resources and management attention necessary to improve our control environment and to meet regulatory expectations,” the bank said, adding that the regulator’s latest announcement did not contain any new findings.