German lender processed millions of dollars in potentially suspicious transactions by Epstein, a registered sex offender, including payments to alleged co-conspirators, Russian models, and $ 800,000 in suspicious cash withdrawals, the Department said on Tuesday. New York State Financial Services.
“While aware of Mr. Epstein’s terrible criminal history, the bank has failed to detect or prevent millions of dollars in suspicious transactions,” said Linda Lacewell, the superintendent of financial services, in a statement. .
The settlement marked the first coercive action against a bank for its dealings with Epstein, who was convicted in 2008 for soliciting sex with a minor and subsequently arrested last year on federal charges of sex trafficking of girls minor. He died in prison last August while awaiting trial, in what was deemed suicide.
It is also the latest monetary penalty imposed on Deutsche, which has paid billions of dollars in fines and settlements for a number of misconduct problems in the past decade, with the goal of harming its performance. reputation for high-risk relationships and poor compliance controls.
“Integration [Epstein] as a customer in 2013 was a critical mistake and should never have happened, “said Christian Sewing, managing director of Deutsche, in an internal memo read by the Financial Times. “Our reputation is our most precious asset and we deeply regret [the] association. »
Sewing told CNBC on Tuesday that Deutsche had made a “critical error” in Epstein’s banking sector. He said there had been “personal consequences” at the senior management level due to the breaches of compliance. “We learned our lesson, but in 2013, the escalation process did not work,” he said.
Deutsche’s approved consent order revealed new details about Epstein’s finances, such as a trust known as “The Butterfly Trust”, whose beneficiaries included alleged co-conspirators and “a number of women bearing surnames from Eastern Europe ”.
Epstein sent more than 120 sons amounting to $ 2.65 million to beneficiaries of the trust for “hotel expenses, tuition and rent,” according to the consent order, which also detailed the apparent settlement payments of more than $ 7 million and legal fees of more than $ 6 million.
In addition, the bank has authorized an anonymous lawyer for Epstein to withdraw approximately $ 800,000 in cash between 2013 and 2017 on the grounds that it was necessary for travel, tips and expenses, the New York financial regulator said.
The regulator also described a series of “procedural failures, errors and negligence” in the handling by Deutsche of more than 40 accounts opened by Epstein between 2013 and 2018, when the bank ended the relationship following a new press review of financial crimes.
Deutsche had previously continued its relationship with Epstein despite questions about its conduct. In January 2015, two Deutsche employees met with Epstein and questioned him about reports of his sex crimes that had surfaced in the press. The employees “seemed satisfied with Mr. Epstein’s response,” according to the regulator, but Deutsche said it had no contemporary records on the merits of the meeting.
That same month, the bank’s reputation risk committee in the United States met to fully assess the relationship with Epstein. The committee did not take minutes, and the additional conditions it imposed had little effect because not all members of the team dealing with Epstein were informed, regulator.
Tuesday’s settlement, which credited Deutsche’s “exemplary cooperation”, also said that the German lender “had not taken appropriate measures” to prevent Danske Bank Estonia from executing billions of dollars in suspicious transactions via accounts in New York.
Between 2007 and 2015, Deutsche acted as correspondent bank for the Estonian branch of Danske, which is believed to have laundered 200 billion euros of money from former Soviet states.
Meanwhile, Germany’s largest lender has authorized more than € 160 billion for the tiny Estonian branch of Danske.
Deutsche left its role of clearing dollars for the Estonian branch of Danske in 2015 after its internal controls began to report an increasing number of suspicious transactions, which the bank reported to the authorities.
The regulator said that Deutsche had also not acted on red flags in its dealings with FBME in Cyprus. The FBME was sanctioned by the United States in 2015 for money laundering problems.
Deutsche acknowledged the flaws in its relationship with Danske and FBME, but said “that there was no intentional effort by anyone within the bank to facilitate illegal activity”.
“We have invested nearly a billion dollars in improving our training, controls and operational processes, and we have brought our financial crime-fighting team to over 1,500 people,” added the bank. . “Our transformation and strengthening continues.”
Olaf Storbeck’s additional report in Frankfurt