According to a source cited report by the Financial Times, U.S. regulators are further looking to expand their probe into Deutsche Bank AG (NYSE:DB) after an investigation of a unit based in Moscow concerning money laundering has widened into consideration of sanction violations.
Transactions involving U.S dollars and a U.S. citizen
According to the report, Financial Services Department of New York and the U.S. Justice Department are expanding their scope of investigation into the bank after they discovered that a few transactions have allegedly involved U.S. currency and a U.S. citizen who is a former banker. According to the Business Daily, the regulatory investigation involves trades worth $6 million and would be the first by the U.S. authorities after their breach of Crimea, against Russia concerning a breach of Western sanctions. Reportedly, the Department of Financial Services (DFS) has demanded detailed information concerning possible money laundering transactions by few clients in Russia, from the bank. The total of these transactions could exceed $6 million.
The investigation mainly focuses on what we call 'mirror trades'. These trades allow fund movement from one country to another without passing through the normal procedures of cross border money transfers. An ex Deutsche Bank AG trader lost his job when an investigation was done on mirror trades by the U.S. and European regulators. However, Wiswell sued the bank for wrongful dismissal in October. According to the report, the Financial Services Department of New York and the U.S. Justice Department are now looking to find whether his alleged involvement was part of a broader scheme which might have been approved by the bank officials.
The bank, had launched an internal investigation in June into Russian securities trades, and is now being examined to check if it had the compliance programs ready for sanctions in Russia and whether it provided its regulators with accurate information or not. According to the bank officials, Deutsche bank has already taken disciplinary actions against some individuals, and as warranted, would continue to do so with respect to other individuals as well.
According to the report, Russian clients of the bank that are subject to U.S. sanctions include Borik and Arkady Rotenberg who are brothers and known to be close associates of Russian president Vladimir Putin. The brothers control Stroygazmontazh, which is an energy saving company and SMP Bank. It is interesting to see that after the sanction were imposed, the brothers sold their assets to their sons which is being seen as an attempt to protect their business from the impact of sanctions.