Deutsche Bank, Germany's largest lender, may be as fined as little as $5,000 by Russian regulators for compliance failures in a probe involving alleged money laundering, Bloomberg reports.
The Russian investigation found no significant abuse of anti-laundering controls connected with so-called mirror trades between Moscow and London and is set to fine the bank for largely technical shortcomings, the newswire reported, citing unidentified individuals.
The Frankfurt-based lender can expect far harsher treatment from US and British market watchdogs, who haven't shirked from slapping bulge bracket investment banks with seven-figure fines in the last four years.
Apparently anticipating a big hit, Deutsche hiked its litigation reserves by $1.3bn in the third quarter mainly to cover alleged violations at the lender's Russian unit.
The bank already forked out about $12bn on litigation costs such as fines and settlements since 2012 for scandals that included the rigging of interest rates in the UK. If Deutsche Bank is found guilty of wrongdoing, industry sources told bne IntelliNews the US fine could be as much as a $1bn.
The lender said on October 29 it had discovered abuses of internal policies during its investigation into so-called ''mirror-trading'', which may have enabled Deutsche Bank's clients to shift money offshore without alerting the relevant authorities.
"We can't say much because we don't know much and that's shame on us,'' co-CEO John Cyran said at an investor conference in London. "It looks as though the bank was used."
Tim Wiswell, head of Russian equities at Deutsche Bank, lost his job earlier this year after 12 years at the lender amid an investigation by US and European regulators into transactions worth over $6bn over four years. Wiswell said on October 7 that he is suing his former employer for wrongful dismissal.
The scandal is the biggest involving a foreign bank in Russia since Bank of New York agreed to settle a $22.5bn lawsuit in 2009 relating to a 1990s money laundering scandal. Lawyers for the Russian government had sought $1bn but the case was settled with the bank paying Russia's legal fees of $14mn as well as providing a loan on favourable terms of $400mn to Russian banks.
Deutsche Bank, a lender whose ties with Russia span 134 years, announced on September 18 that it was closing its Moscow Corporate Banking & Securities Business by the end of year following the money laundering allegations.
However, banking insiders told bne IntelliNews the bank was forced to shut down its investment banking division in Moscow after the Central Bank of Russia (CBR) threatened to revoke its main banking license amid the furore over allegations.
Only the intervention by a senior German politician, believed to be Finance Minister Wolfgang Schaeuble, and a pledge to wind down the onshore Corporate Banking & Securities Business averted that course of action, according to a senior Moscow banker familiar with the central bank's dealings. However, Deutsche Bank rejected the reported version as untrue.