German authorities searched Deutsche Bank’s Frankfurt headquarters for a second straight day on Friday as part of an ongoing money-laundering probe into the country’s largest bank.
Over 150 police officers and federal tax authorities raided Deutsche Bank’s headquarters and five other sites in the area on Thursday. The search area included board members’ offices and one employee’s home and continued into Friday.
The investigation is focused on two Deutsche Bank employees, identified only by their ages, and potentially others who are suspected of helping their clients create offshore accounts and failing to alert the authorities of suspicious transactions.
Basically, when they saw something fishy, they were supposed to say something — and they allegedly didn’t.
The raids are related to the Panama Papers, a huge trove of documents exposing a global web of money laundering and tax evasion that were leaked in 2016.
If you feel like you’ve heard of Deutsche Bank behaving badly in the past, that’s because you probably have. The lender has faced tens of millions of dollars in fines from authorities in the United States and Europe in recent years, for misdeeds ranging from money laundering and Russian “mirror trading” to misleading investors in its sale of mortgage-backed securities. As part of the mirror-trading scheme, Deutsche Bank helped clients get billions of dollars out of Russia by letting them buy stocks in Moscow in rubles and selling the same quantity of shares in London in dollars, thus transferring rubles into dollars.
The German bank also has ties to President Donald Trump and is one of the few financial entities that will still lend him money. It has also extended loans to Trump’s son-in-law and adviser Jared Kushner, and last year it reportedly received a request from special counsel Robert Mueller’s team asking for information on financial transactions made by Trump and his associates.
But it doesn’t look like the current raids have anything to do with Trump.
What’s happening in Frankfurt
On Thursday morning, German police and other authorities raided six different properties, including Deutsche Bank’s headquarters, in relation to its probe of the bank.
According to the New York Times, they took papers and electronic records related to an investigation into whether two employees, age 50 and 46, and others failed to report suspicious transactions when helping clients create offshore accounts, “although ample grounds existed” for them to do so.
The period in question started in 2013 and stretched into this year. Employees eventually started to flag the transactions as suspicious, but only after the Panama Papers came out. Prosecutors say a Deutsche Bank subsidiary in the British Virgin Islands helped 900 customers with transactions worth over $350 million in 2016 alone.
“Deutsche Bank helped customers found offshore organizations in tax havens by transferring illegally acquired money without alerting authorities to suspected money laundering,” prosecutors said, according to the Times.
Deutsche Bank acknowledged the searches in a series of tweets Thursday and said it believed it had “already provided the authorities with all the relevant information” regarding the investigation, but that it would “fully cooperate” with investigators.
As far as we are concerned, we have already provided the authorities with all the relevant information regarding Panama Papers. Of course, we will cooperate closely with the public prosecutor’s office in Frankfurt, as it is in our interest as well to clarify the facts.
— Deutsche Bank (@DeutscheBank) November 29, 2018
As raids continued on Friday, the bank released a fact sheet on what was happening, saying the “preliminary proceedings” concern the period from 2013 and 2018 and that the search included several board members’ offices. The bank said that it had sold the British Virgin Islands subsidiary that helped provide customers with “a structure that made money laundering possible” in March 2018.
“It looks like the German government is conducting these raids and running these searches to gather additional information that could support money laundering or tax evasion-type cases,” Rob Long, a partner at law firm Bell Nunnally & Martin and former federal prosecutor at the Justice Department, told me.
Deutsche Bank’s stock price has plunged in reaction to the news. Jason Kennedy, the chief executive officer of recruiting firm the Kennedy Group, described the scenario to Bloomberg as “a nightmare with eyes wide open.”
Deutsche Bank seems a little shady
Deutsche Bank has seen its fair share of run-ins with government officials.
At the start of 2017, for example, it agreed to pay the New York Department of Financial Services $425 million over a so-called “mirror trading” scheme that moved $10 billion out of Russia between 2011 and 2015. British authorities fined Deutsche Bank over the same scheme.
The Federal Reserve also fined Deutsche Bank $41 million in May 2017 for “deficiencies” after determining that it had failed to maintain an effective program for complying with anti-money-laundering laws. And in June 2018, the New York banking regulator fined the bank $205 million over violations relating to the company’s foreign exchange trading business.
Christian Sewing, who replaced John Cryan as CEO of Deutsche Bank this spring, has been trying to turn things around at Deutsche Bank, not only in terms of its legal troubles but also with regard to its financials. According to the Wall Street Journal, as the raids were underway on Thursday, he took part in a pre-scheduled lunchtime meeting with Randal Quarles, the Fed’s vice chair for supervision.
News of the Deutsche Bank raids has also drawn attention again to the bank’s ties to Trump, though it appears the searches don’t involve anything Trump-related.
Timothy O’Brien at Bloomberg outlined the president’s long-standing relationship with the financial institution and noted the possibility that Democrats in the House will subpoena Deutsche for banking records and other information on its Trump ties. California Democratic Rep. Maxine Waters, who is expected to take over as chair of the House Financial Services Committee next Congress, has signaled that she plans to look into Trump’s Deutsche Bank dealings.
Deutsche Bank, O’Brien wrote, “is in trouble again. And, to a certain extent, Deutsche’s troubles are going to be President Donald Trump’s troubles.”
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