Years before regulators learned about what may be one of the biggest money-laundering pipelines in history, low-level bank employees in Jacksonville, Florida, sounded repeated alarms.
Compliance workers for Deutsche Bank AG flagged some of at least $150 billion in transactions that the bank’s U.S. subsidiary handled for a tiny Estonian unit of Danske Bank A/S, according to a former compliance officer.
It’s not clear how urgently the Florida team warned executives at Deutsche Bank Trust Co. Americas. But when workers sought broader scrutiny of certain clients, they got a familiar response from some higher-ups, the officer said: Shut up, focus on the transaction in front of you, file your paperwork and move on.
Internal documents, court records and interviews with dozens of people -- including more than 20 current and former employees of the troubled German lender -- show that its U.S. unit largely resisted strict money-laundering compliance for years. The insider accounts help explain why Deutsche’s U.S. subsidiary kept handling Danske’s business after competitors quit.
Although U.S. executives routinely promised regulators they’d get tough, former staffers say such efforts were often disregarded in favor of cozy relationships with overseas customers. The suspicious billions kept flowing -- not just from Danske’s Estonian branch, but from various clients that would eventually be snared in other global money-laundering scandals.
Frankfurt-based Deutsche Bank, which is in talks to merge with Commerzbank AG after years of losses, declined to address allegations about its past practices. But the bank said in a statement that its U.S. operations “have increased our anti-financial crime staff and enhanced our controls in recent years.” The lender takes compliance with money-laundering laws and related provisions seriously, it said. In the Danske case, bank executives have said they’re cooperating with investigators in multiple jurisdictions and that they met their legal obligations as they dealt with the Danish lender from 2007 to 2015.
“Their defense would have more appeal if Deutsche Bank didn’t have such a poor track record,” said Jimmy Gurulé, a former undersecretary for enforcement in the U.S. Treasury Department and a professor at Notre Dame Law School. “There’s been one problem after another.”
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Deutsche’s U.S. trust company, which houses a global transaction bank, a private wealth unit and a lender, has attracted attention for the hundreds of millions of dollars in loans it extended to President Donald Trump’s real estate business. But it’s now the focus of a Federal Reserve probe into the Danske affair, according to a person briefed on the situation who asked not to be named because the regulator’s work isn’t yet public. The U.S. Department of Justice has also sought information from the bank, two other people have said.
It’s hardly the first time for such scrutiny. Over the trust bank’s 20-year history, government authorities have concluded at least five times that it either failed to police the money flows it handled or enabled efforts to evade U.S. law.