In an interesting article in the FT this week, it was suggested that the UK Financial Conduct Authority (FCA) and the UK Prudential Regulation Authority are increasingly concerned about Deutsche Bank’s failure to enhance its approach to anti-money laundering and compliance to such an extent this might even delay confirmation of the bank’s authorisation in the UK after Brexit.
This concern stems from repeated breaches and issues persisting for the four years after the bank became subject to special supervision by the FCA after serious and systemic failures related to AML, sanctions control and terrorist finance.
The FT noted recent problems such as mistaken data distribution of client transactions to Amazon, plus subsequent delayed notification to affected clients and regulators. Another IT failure recently saw the bank being unable to utilise the CHAPS payments system for the main part of one trading day. Issues like this would come under scrutiny as assessments of controls and systems resilience are very much part of the reauthorisation process which is due to be concluded by the end of 2020.
Regulators have now placed the German lender on monthly updates (rather than quarterly) while doubts about Deutsche’s competence and commitment continue. Deutsche has said that it has tripled the number of staff in its anti-financial crime division since 2015, and put aside €4bn to improve controls, and is also investing significant amounts to improve the stability and security of its payment clearing systems.
Deutsche reorganised its European control functions last summer after its embattled compliance chief Sylvie Matherat, a former French central banker, was let go. She was criticised for failing to tackle a raft of money laundering issues. BaFin’s decided in 2018 to appoint an independent auditor to oversee Deutsche’s efforts to improve its anti-money laundering and terrorism financing approach, notably its role in the Danske Bank money laundering scandal. Last December, Frankfurt prosecutors fined Deutsche €5m for shortcomings in its controls and confiscated €10m of earnings from controversial transactions.