German watchdog steps up Deutsche Bank money laundering monitoring

FRANKFURT AM MAIN: German financial regulator Bafin on Friday said it had asked an external monitor to take a closer look at Deutsche Bank's anti-money laundering efforts amid questions over the lender's role in handling suspicious transfers for Danske Bank.

Bafin took the unprecedented step last September of installing KPMG auditors at Germany's largest bank to oversee its progress in battling illegal transactions such as money laundering, terrorist financing and organised crime.

In a statement, the watchdog said it had now ordered Deutsche Bank to "review its group-wide risk management processes in the area of correspondence banking" and make the necessary changes.

Bafin added that it had widened KPMG's three-year mandate to cover monitoring the bank's implementation of the order.

The move comes as Deutsche Bank is under scrutiny over its activities as a correspondence bank that handled foreign transactions for Danske's Estonian branch.

Investigators in Copenhagen, Brussels, London and the United States are probing some 200 billion euros in transfers that passed through the Estonian branch between 2007 and 2015, involving some 15,000 foreign clients.

Deutsche Bank said it had been expecting the expansion of KPMG's mandate.

"There is a strong interest in the matters concerning Danske Bank Estonia among regulators globally," it said in a statement.

"There are still no indications of misconduct on our part in this context."

Deutsche has previously said it worked with Danske for eight years, before ending the relationship in 2015 after suspect activities were uncovered at the Danish firm.

Deutsche has insisted it played only a "limited role" in the Danske transactions because as a correspondent bank it did not have "access to their client base".

Deutsche Bank has repeatedly been rapped by regulators in the past for lax controls.

In 2017, it had to pay a fine of almost $630 million (559 million euros) after an investigation by British and American authorities into laundering of money originating in Russia.

Soon afterwards, the US Federal Reserve ordered a further fine of $41 million over gaps in the bank's money laundering surveillance.