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Deutsche Bank AG on Friday agreed to pay more than $130 million to resolve a Justice Department investigation into violations of the Foreign Corrupt Practices Act and a Securities and Exchange Commission probe into a commodities fraud scheme.
This is the latest blow for the German bank that has faced a series of scandals over financial crimes compliance failures. In response to the announcement, the bank vowed to bolster its anti-financial crime compliance program.
The payout, roughly two-thirds of which is a criminal fine, is part of a three-year deferred prosecution agreement with the Justice Department and a related civil settlement with the SEC.
The accords address activity that occurred between 2008 and 2017. They were made public on Friday at a hearing in the federal court in Brooklyn, New York.
The charges stem from a scheme to conceal corrupt payments and bribes made to third-party intermediaries by falsely recording them on Deutsche Bank’s books and records, as well as related internal accounting control violations, and a separate scheme to engage in fraudulent and manipulative commodities trading practices involving publicly-traded precious metals futures contracts, the Justice Department said.
“Deutsche Bank engaged in a seven-year course of conduct, during which it failed to implement a system of internal accounting controls regarding the use of company funds and falsified its books and records to conceal corrupt and improper payments,” said Acting Deputy Assistant Attorney General Robert Zink of the Justice Department’s Criminal Division. “Separately, Deutsche Bank traders on three continents sought to manipulate our public financial markets through fraud for five years.”
When contacted by Regulatory Intelligence, a bank spokesman cited a statement posted on the institution’s website.
“While we cannot comment on the specifics of the resolutions, we take responsibility for these past actions,” the bank statement said[here]. “Our thorough internal investigations, and full cooperation with the DOJ and SEC investigations of these matters, reflect our transparency and determination to put these matters firmly in the past.”
The statement added that the bank has increased its anti-financial crime team to more than 1,600 people globally “and we’ll continue to invest significantly in technology this year and in the future, particularly as it relates to anti-financial crime compliance.”
U.S. prosecutors accused Deutsche Bank of violating books-and-records provisions of the Foreign Corrupt Practices Act (FCPA), which bars companies with U.S. operations from paying bribes elsewhere.
A statement[here] from the Justice Department said the violations included disguising bribes paid to a client’s “decisionmaker” in Saudi Arabia as “referral fees” in order to retain that client’s business, and concealing millions of dollars of payments to an intermediary for an Abu Dhabi official by recording them as “consultancy” fees.
The Justice Department settlement amounts to $79.6 million in the FCPA case[here], $5.6 million for the commodities trading violations, and $1.9 million in victim compensation and interest over the commodities trading violations. The settlement reflects a discount over department guidelines, but less of a reduction that it otherwise would have been, given earlier misconduct by the bank, the department said.
The commodities fraud charge arose from Deutsche Bank precious metals futures traders accused of placing fraudulent trades, known as spoofing, to induce other traders to buy and sell futures contracts at prices they otherwise would not have.
The SEC order states that millions of dollars in bribe payments were inaccurately recorded as legitimate business expenses and involved invoices and documentation falsified by Deutsche Bank employees[here]. Deutsche agreed in the SEC settlement to pay $43.3 million in disgorgement and interest.
“While third parties can assist in legitimate business development activities, it is critical that companies have sufficient internal accounting controls in place to prevent payments to third parties in furtherance of improper purposes,” said Charles Cain, chief of the SEC enforcement division’s FCPA unit.
Deutsche Bank is trying to regain profitability after five years of losses, including by exiting some businesses and reducing its workforce by 18,000.
The bank has also been trying to restore its image in Washington amid several investigations into its dealings with U.S. President Donald Trump, a longtime client.
In 2019, Deutsche Bank agreed to pay more than $16 million to resolve SEC accusations it violated the FCPA by hiring unqualified relatives of government officials in Asia and Russia in order to win or retain business.
Credit Suisse Group AG paid $77 million to settle a similar case last year, while JPMorgan Chase & Co agreed in 2016 to pay $264 million to resolve U.S. claims it hired the relatives of Chinese officials to win banking deals.
(Reporting by Brett Wolf, Regulatory Intelligence; Reuters News contributed to this report)
*To read more by the Thomson Reuters Regulatory Intelligence team click here: bit.ly/TR-RegIntel
This article was produced by Thomson Reuters Regulatory Intelligence – bit.ly/TR-RegIntel – and initially posted on Jan. 11. Regulatory Intelligence provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Regulatory Intelligence compliance news on Twitter: @thomsonreuters