The Central Bank of Russia has revoked the license of brokerage Rye, Man and Gor (RMG) in a move reportedly linked to alleged money laundering by Deutsche Bank.
The regulator shut down RMG, one of Moscow's oldest brokerages, because of questionable transactions and repeated violations of money laundering regulations, the Vedomosti business daily reported. RMG failed to properly implement requirements for identifying clients in a case, which may be linked to an alleged $10bn trading scandal involving Deutsche Bank, according to the newspaper.
The brokerage was founded in 1994 by Gerald and Arshak Manasova and Alexei Goryachev and has changed owners twice over the past two years. It was sold to a British company Vesta Enterprices and then resold to owned by a Cypriot company Dayarona Trading owned by Andrey Gorbatov.
The new owner Gorbatov intends to sue the CBR on account of the charges made towards it, he told Vedomosti, acknowledging that RMG had traded with Deutsche Bank but denying any involvement in the so-called "mirror transactions" that rocked the Frankfurt-based lender last year.
RMG bought shares from Deutsche Bank on behalf of its counterparties because the bank offered competitive prices for large volumes of securities, and the CBR "has seen these operations", Gorbatov said.
Deutsche Bank said in October it had discovered abuses of internal policies during its investigation into mirror trading, which may have enabled the lender's clients to shift money offshore without alerting the relevant authorities. Tim Wiswell, head of Russian equities at Deutsche Bank, lost his job last year after 12 years at the lender amid an investigation by US and European regulators into transactions worth over $10bn over four years. Wiswell is suing his former employer for wrongful dismissal.
Deutsche Bank, a lender whose ties with Russia span 134 years, announced on September 18 that it was closing its investment bank in Russia following the money laundering allegations.
However, banking insiders told bne IntelliNews that the bank was forced to shut down its investment banking division in Moscow after the 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. Deutsche Bank rejected the reported version as untrue.
Deutsche may be as fined as little as $5,000 by Russian regulators for compliance failures in a probe involving alleged money laundering, according to Bloomberg. 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, unidentified sources told the newswire.
The German bank can expect far harsher treatment from US and British market watchdogs, who in recent years hit major investment banks with seven-figure fines. Apparently anticipating a big hit, Deutsche hiked its litigation reserves by $1.3bn in the third quarter, mainly to cover alleged violations at its Russian unit.
Deutsche already forked out about $12bn on fines and settlements since 2012 for scandals that included the rigging of interest rates in the UK. If it is again found guilty of wrongdoing, industry sources told bne IntelliNews the US fine could be as much as a $1bn.
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