US and British regulators have fined Deutsche Bank $630m in connection with money laundering worth $10bn in Russia. The action against the bank was initiated after it had missed "numerous opportunities" to investigate and stop the faulty scheme.
New York State's Department of Financial Services accused the bank of carrying out mirror trades among its Moscow, London and New York offices in order to launder money out of Russia. "This Russian mirror-trading scheme occurred while the bank was on clear notice of serious and widespread compliance issues dating back a decade," said DFS Superintendent Maria Vullo, according to The Guardian.
Investopedia explains mirror trade as a strategy which enables investors to copy the forex trading (exchange for currencies at an agreed exchange price on the over-the-counter market) behaviour of experienced and successful forex investors from around the world. In Deutsche Bank's case, one client would purchase stocks in roubles in Moscow and the other client, with the same owner, would sell it through the bank's London branch, at the same price.
"By converting roubles into dollars through security trades that had no discernible economic purpose, the scheme was a means for bad actors within a financial institution to achieve improper ends while evading compliance with applicable laws," said the legal document detailing the settlement with DFS.
However, Deutsche Bank said that it was co-operating with regulators and even put aside money to cover the settlement cost of $7.2bn. Currently, the US Department of Justice is also investigating the matter.
It was also reported that Britain's Financial Conduct Authority joined hands with New York authorities in order to penalise the banking giant. This decision was taken after the financial regulatory body found loopholes in the Deutsche Bank's policies on internal safeguards for money laundering and client risk.
Now to regain feet, Deutsche Bank has to hire an outside monitor to review its internal compliance measures, other than paying the fine. The regulators fined three other banks for violating laws and engaging in money laundering acts. While Intesa Sanpaolo bank in Italy was fined $235m, China's Agricultural Bank and Taiwan's Mega Bank of Taiwan was fined $215m and $185m, respectively.