Deutsche Bank Fined $150 Million Over Jeffrey Epstein Links

Published On July 8, 2020

The New York Department of Financial Services (NYDFS) has fined Deutsche Bank AG $150 million for failing to monitor its dealings with late financier and convicted sex offender Jeffrey Epstein. The fine was also issued for the lender’s “close” relationship with two European banks linked to money-laundering scandals. In both cases, Deutsche failed to act on clear red flags, which resulted in several unmonitored fund transfers.   

The penalty from New York’s regulator comes after Deutsche Bank received a fresh rebuke from the Federal Reserve over its money-laundering controls at its U.S. operations. According to the NYDFS, the lender has played a key role in Epstein’s financial dealings since 2013, when JPMorgan Chase & Co. dropped him as a client over reputational concerns. Epstein accrued more than $500 million over three decades through close relationships with his billionaire clients, although it is unknown how much went through Deutsche Bank.

Deutsche Bank faces charges for helping Epstein move millions of dollars in cash and securities through dozens of accounts in recent years. The NYDFS found that the bank had processed transactions that should have been flagged, including periodic cash withdrawals totaling $800,000 over four years and payments to individuals connected to his alleged activities involving young women. Among other transactions that should have raised questions, were payments to Russian models, school tuition fees for women, and hotel and rent expenses that were consistent with public allegations of wrongdoing.

NYDFS officials said the bank’s fundamental failure was that, although it properly classified Epstein as high-risk, it “failed to scrutinize the activity in the accounts for the kinds of activity that were obviously implicated by Mr. Epstein’s past.” The New York regulator “recognizes and credits” Deutsche Bank’s full cooperation. Deutsche Bank hopes to improve future oversight, “We acknowledge our error of onboarding Epstein in 2013 and the weaknesses in our processes, and have learned from our mistakes and shortcomings.”

Authorities are also investigating the lender’s role in Danske Bank’s money-laundering scandal, where Deutsche processed payments as correspondent bank for Danske Estonia. It finally terminated the relationship in 2015 after identifying suspicious client activity but didn’t cut off the bank for years despite repeated red flags. Likewise, the German lender remained as the largest correspondent bank with the Federal Bank of the Middle East (FBME) even though the U.S. Treasury’s Financial Crimes Enforcement Network named FBME a foreign financial institution of primary money-laundering concern in 2014. 

“In each of the cases that are being resolved today, Deutsche Bank failed to adequately monitor the activity of customers that the bank itself deemed to be high risk,” said Superintendent of Financial Services Linda A. Lacewell. The U.S. Justice Department has been looking into the bank’s money-laundering controls and longtime links between Deutsche, Russian companies, and President Trump. The U.S. Supreme Court is expected to rule on whether the bank must hand over Trump’s financial records this week.