Federal Reserve Board and New York Department of Financial Services Impose $258 Million Penalty Against Deutsche Bank Related to SanctionsNovember 5, 2015
On November 4, 2015, Deutsche Bank AG (Deutsche Bank or the Bank) agreed to pay a total of $258 million in penalties as part of consent orders entered into with the New York State Department of Financial Services (the NYDFS) and the Board of Governors of the Federal Reserve System (the Federal Reserve) to resolve an investigation into apparent violations of law related to U.S. sanctions. According to the consent orders, between at least 2001 and 2006, certain overseas offices of Deutsche Bank processed U.S. dollar-denominated funds transfers through Deutsche Bank Trust Company Americas (DBTCA), a subsidiary of Deutsche Bank chartered under New York law, and unaffiliated U.S. financial institutions, involving sanctioned parties that did not contain information in the payment messages that was necessary for those institutions to determine whether the transactions complied with U.S. law. In its order, the Federal Reserve states that this conduct caused “intermittent violations” of sanctions program requirements. The NYDFS’s order states that the violations were the result of measures actively undertaken by employees at the overseas offices to conceal the identity of sanctioned entities.
Under the consent orders, the Bank is required to implement an enhanced program to ensure global compliance with U.S. sanctions programs administered by the Office of Foreign Assets Control (OFAC). Both require the retention of a third party—the Federal Reserve requires an independent consultant to conduct an OFAC compliance review and the NYDFS requires a monitor to conduct a one-year comprehensive review of the Bank’s existing BSA/AML and OFAC sanctions compliance programs and to make recommendations. Both actions also include provisions aimed at holding accountable the individuals responsible for the misconduct. The Federal Reserve’s order prohibits the Bank from in the future retaining as an officer, employee, agent, consultant, or contractor individuals who participated in the misconduct, have been subject to discipline and who have now either separated from the Bank or been terminated, as well as “Banker #29, a former senior compliance executive of Deutsche Bank during the relevant time period.” The NYDFS’s order similarly precludes the Bank from rehiring certain terminated or departed individuals, and also requires the Bank to terminate six employees still employed by the Bank and to restrict the scope of employment for an additional three employees.
Wednesday’s consent orders are the latest in a series of sanctions-related enforcement actions against large financial institutions, e.g., Commerzbank, BNP Paribas, HSBC, Barclays, Standard Chartered, and Crédit Agricole, to address non-transparent payment practices. As with many of those other actions, the consent orders against Deutsche Bank indicate a continued willingness to bring actions relating to conduct occurring more than 10 years earlier. Wednesday’s actions also highlight the prominent role the NYDFS continues to assert in many of these settlements. Out of the $258 million total penalty, $200 million was assessed by the NYDFS—an amount more than three times as large as the Federal Reserve’s $58 million penalty.