Tumultuous History
Deutsche Bank Trust Co. Americas -- which is separate from Deutsche Bank Securities Inc., the better-known trading division -- rose from the ashes of another scandal-plagued bank. The century-old Bankers Trust was largely uncontroversial until the 1990s, when it began innovating in financial derivatives. Customers lost money and sued, and the litigation unearthed taped conversations among traders who called their deals “gravy trains.” In transcripts, an employee discussed a client’s loss on a trade, saying, “Pad the number a little bit.” Another worker told a colleague, “Funny business, you know? Lure people into that calm and then just totally f--- ’em.” By 1999, Bankers Trust was ripe for rescue by a German buyer with about $9 billion to spend.

Soon the new institution had its own tumultuous history. From 1999 through 2006, it handled almost $11 billion in U.S. dollar transactions for customers in nations under sanctions: Iran, Syria, Libya, Burma and Sudan. Later, it helped rich Russians move $10 billion from their country using “mirror trades” -- simultaneous stock trades in separate jurisdictions that bypassed customary hoops for transferring money.

In between, in cases where the bank wasn’t accused of any wrongdoing, it also provided banking services for:

Russia’s Sberbank PJSC while the government-controlled bank was involved in a years-long scheme that funneled millions to a man in the U.S. who admitted to smuggling $65 million worth of potential nuclear technology to Russia, according to federal prosecutors; Kenyan fraudsters who scammed U.S. income tax refunds using identities stolen from Indiana sex offenders; and a Colombian drug cartel that received payments from the U.S. Drug Enforcement Administration as part of an undercover operation. The payments, disguised as profits from auto-parts sales, were transferred into a Deutsche account and exhibited what a DEA undercover agent called “obvious red flags.”

Today, Deutsche Bank Trust Co. Americas is one of the last Wall Street banks that’s actually on Wall Street. Former employees say the subsidiary -- housed in a skyscraper that’s sheathed in glass and lined with mahogany paneling -- has been a kind of legal mirage for most of its existence. The unit provides an entrée for Deutsche Bank to operate as a lender in America, those people said, but its U.S.-based executives have had little authority.

High-Volume Work
Much of its behind-the-scenes work is akin to plumbing: It opens channels for international cash, takes care of customers’ assets and clears transactions in dollars. It’s high-volume, low-margin work -- not glamorous, but necessary to the global economy.

For foreign banks like Danske, the unit opens an industrial-scale teller window into the U.S. financial system that their customers can use -- what’s known as a correspondent banking relationship. Of course, when the plumbing fails, the results can be unpleasant.

In Danske’s case, Danish regulators say Estonian employees covered up money-laundering violations for years. The bank has admitted that roughly $230 billion that passed through that unit between 2007 and 2015 -- much of it from Russian clients -- was suspicious. A person familiar with the matter confirmed that at least $150 billion flowed through Deutsche Bank, and one report put the figure at about $185 billion.

When that money flow began, the chief of the German lender’s U.S. business was Seth Waugh, a perpetually tanned executive who wore his graying hair a bit long by bankers’ standards. Waugh pledged to regulators in 2005 that he’d overhaul the bank’s money-laundering protections. But in a 2013 letter that served as a scathing review of his tenure, the Federal Reserve Bank of New York concluded that “no progress was made” on concerns first raised in 2002.

Unanswered Questions
Waugh, widely described as affable and approachable, had only limited influence over staff members’ bonuses or other personnel matters -- or even key points of Deutsche’s U.S. balance sheet, according to several former colleagues. Employees say he often couldn’t answer questions about bank operations or regulatory matters because the real decision-makers were sitting in Europe.