Deutsche Bank AG has been hit with a $186 million fine by the Federal Reserve after an investigation revealed its failure to implement adequate measures to prevent money laundering, following previous violations. As part of the settlement, the German lender has also agreed to enhance its risk management and governance practices. The Federal Reserve's findings primarily focused on "unsafe and unsound practices and violations" related to Deutsche Bank's prior relationship with Danske Bank's Estonian branch. This is the latest in a series of regulatory issues for Deutsche Bank with US authorities, and despite the penalty, the bank's shares rose 1.6% in Frankfurt trading.
Deutsche Bank released a statement acknowledging their historic shortcomings in adhering to older enforcement actions and agreements, but emphasized that they have taken significant steps to improve controls. The bank expressed confidence in its ability to exceed regulatory expectations in the future. CEO Christian Sewing has been working towards resolving various scandals and regulatory setbacks in recent years, but new problems continue to arise, preventing the bank from reaching its cost-cutting targets and necessitating spending on remediation efforts.
The Federal Reserve's order stated that Deutsche Bank had not made enough progress in addressing previous allegations. The bank fell short in areas such as compliance oversight, customer due diligence, transaction data monitoring and filtering, suspicious activity reporting, as well as independent third-party reviews. While some progress was noted, the central bank maintained that Deutsche Bank still had significant exposure to compliance risks due to insufficient internal controls.
Deutsche Bank has agreed to several steps, without admitting or denying the allegations, to strengthen its risk management program and anti-money laundering controls. The recent appointment of Stefan Simon, a management board member overseeing regulation and compliance, as the new head of the Americas division is a significant move for the bank. This marks the first time that Deutsche Bank's highest-ranking compliance official will be based in the US, emphasizing the bank's commitment to addressing regulatory concerns.
Despite the financial penalty, Deutsche Bank remains determined to turn the page on its troubled past. The bank is actively working towards resolving legacy issues, but ongoing challenges underscore the need for continued focus on compliance and risk management.