Photographer: Alex Kraus / Bloomberg
Photographer: Alex Kraus / Bloomberg
Deutsche Bank AG has agreed to pay more than $ 130 million to settle criminal and civil charges of bribing foreign public officials and manipulating the precious metals futures market through a trading tactic known as spoofing.
The Frankfurt-based bank has agreed to an agreement for which it will not be prosecuted, as long as it does not engage in the practices again for more than three years, and was not required to plead guilty to the charges. The case was brought by federal prosecutors in Brooklyn, New York and Washington, who secured a $ 920 million fine against JPMorgan Chase & Co. last year, the biggest sanction ever linked to spoofing.
The big banks have been rushing to complete legal deals before the US governments move, partly for fears that there may be heavier fines under a Democratic president. Three major American banks have agreed to pay more than $ 4 billion in deals announced just before the November elections, on issues ranging from bribery to market manipulation.
Deutsche Bank’s deal with the Department of Justice was confirmed at a remote hearing in a federal court in Brooklyn on Friday. The bank will pay $ 80 million in criminal penalties for violating the Foreign Corrupt Practices Act and another $ 5.6 million for commodity fraud, although the bank received credit on the last fine for an earlier settlement with the Commodity Futures Trading Commission.
‘Corrective actions’
In addition, Deutsche Bank will pay more than $ 43 million to the Securities and Exchange Commission to resolve a parallel civil suit against him for the bribery conduct. The SEC investigation found that adequate internal accounting controls over third-party intermediaries were missing, with $ 7 million in suspicious payments recorded as legitimate business expenses. Bank officials also forged invoices and other documents, according to the SEC.
“Although we cannot comment on the details of the resolutions, we assume responsibility for these past actions, which took place between 2008 and 2017,” said Deutsche Bank spokesman Dan Hunter in a statement. “Our thorough internal investigations and full cooperation with DOJ and SEC investigations on these matters reflect our transparency and determination to leave these matters firmly in the past.”
The bank has taken “significant corrective action,” said Hunter, investing more than 1 billion euros ($ 1.22 billion) in data, technology and controls, improving its training and increasing its global financial crime team to more than 1,600.
Spoofers trick other investors into buying or selling by placing on their own buy or sell orders, with no intention of filling them. This creates artificial demand that raises or lowers prices. With common computerized commerce, the practice has long been disapproved of and has become a threat to the legitimacy of the market. Spoofing contributed to the sudden crash in May 2010, when nearly $ 1 trillion was temporarily eliminated from the United States stock market.
QuickTake: Spoofing is a silly name for serious market equipment
Traders argue that it is very difficult to distinguish crime from legitimate order cancellations. Prosecutors have to prove that merchants intended to cancel their orders in advance.
Two Deutsche Bank brokers, Cedric Chanu and James Vorley, were convicted in September for manipulating the prices of gold and silver contracts. They were accused of entering false bids for contracts, canceling them before orders were fulfilled and profiting from price fluctuations between the two.
Bribes to ‘Consultants’
In the case of the foreign bribery case, the United States says Deutsche Bank managers have agreed to pay millions of dollars to “consultants” for investment managers in Abu Dhabi and Saudi Arabia, which were actually bribes for intermediaries to get business.
In Abu Dhabi, managers provided financing for an official investment yacht and also cash, totaling $ 3.5 million, which helped the bank earn $ 35 million in fees.
In Saudi Arabia, payments were made to an entity controlled by the wife of an investment manager in exchange for supervision of hundreds of millions of dollars in family assets owned by a Saudi official. Payments totaled more than $ 1 million, including a loan of more than 600,000 euros for the asset manager to buy a home in France.
In both cases, the bank’s top executives were aware of the payments, according to court records.
Deutsche’s woes
Deutsche Bank’s legal problems come at the top of a long downward spiral of declining revenues, stubborn fixed expenses, low credit ratings and rising financing costs. The bank paid more than $ 18 billion in fines for financial misconduct in the decade since the financial crisis.
In July, she agreed to pay the New York banking regulator $ 150 million for a series of compliance lapses, including half a decade of negligent oversight of financial convictions by convicted sex offender Jeffrey Epstein.
German authorities fined the company € 13.5 million in October for money laundering violations related to working with Danske Bank A / S. The bank has failed on more than 600 occasions to send timely alerts on suspicious transactions, Frankfurt prosecutors said at the time.
The case is US v. Deutsche Bank AG, 20-cr-584, United States District Court, Eastern District of New York (Brooklyn).
– With the help of Yalman Onaran
(Updates with details of the agreement in the fourth and fifth paragraphs and with specific sums.)