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Apr 03 2019

Co-conspirator Deutsche Bank

Umm… the Mueller stuff is not going away. It is true beyond a reasonable doubt that Unidicted Co-conspirator Bottomless Pinocchio has been laundering money for years and years. It’s also true there’s a convictable Quid Pro Quo in the Moscow Tower deal but we’re going to highlight instead Unindicted Co-conspirator Bottomless Pinocchio’s Bank of last resort- Deutsche Bank.

Deutsche Bank’s U.S. Unit Kept Danske’s Shady Billions Flowing
By Tom Schoenberg, Jesse Hamilton, and Sonali Basak, Bloomberg News
April 3, 2019

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.

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.

(I)n 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.

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.

Banks’ efforts to prevent money laundering revolve around three words: “Know your customer.” U.S. rules under the Bank Secrecy Act require bankers to keep tabs on who they’re doing business with. The goal is to keep criminals and terrorists from plowing illicit cash into legitimate investments.

In Jacksonville, that task fell to an office that was understaffed and overly permissive, insiders recall. It was akin to assembly-line work with little review of potential clients and transactions, said a former employee who added that the organization’s willingness to bank just about anybody was a running joke.

Files submitted to compliance workers from overseas often lacked detail about who was transmitting money, according to former workers and legal filings in the 2016 lawsuit. Specialists hired to advise the bank on gaps in its monitoring systems were instead assigned to review individual transactions that those systems had flagged. They were often rebuffed by New York executives or supervisors in New Jersey if they singled out particular customers for deeper scrutiny.

In such cases, staff members were directed to file routine “suspicious activity reports,” or SARs, a basic legal requirement in cases where bank employees consider a source of funds to be questionable. Such filings record potentially problematic activity but don’t trigger government reviews on their own. Often, they simply languish at the Treasury Department.

Deutsche executives’ public responses to the Danske case tend to sidestep concerns about “know your customer” efforts. Because their bank had a correspondent relationship with Danske, they’ve argued that the Danish bank was the only customer they were required to know — not clients who were banking with Danske.

“The primary duties rest with the bank that has the immediate contact with the client,” said Karl von Rohr, Deutsche Bank’s co-deputy CEO and legal head, on Feb. 1.

As Douglas Sloan, then a financial crimes investigative chief for Deutsche’s U.S. unit, said in testimony in December 2017: “We don’t know our customers’ customer on the other side of the planet.”

But it’s not that simple. U.S. banking laws require correspondent banks to make sure their customers are policing their own clients — especially on big transactions. Another bank clearly had qualms about Danske; JPMorgan Chase & Co. ended its correspondent relationship with Danske’s Estonian branch in 2013. Bank of America Corp. cut off its relationship with the unit in May 2015. Deutsche Bank was the last to break with Danske later that year.

Like other correspondent banks, it relies on a largely automated system called “straight-through processing,” or STP. That system checks names and places against government risk lists and other factors. For years, executives have bestowed an “STP Excellence Award” on customers that successfully move money through Deutsche’s system while raising the fewest red flags. The awards have sometimes gone to questionable recipients.

Cyprus-based FBME Bank Ltd. won eight of them through 2013, according to news releases. The Treasury Department later accused that bank of having weak money-laundering controls that allowed customers to conduct more than $1 billion in suspicious transactions through various correspondent accounts, including one with Deutsche Bank’s U.S. unit, from 2006 to 2014. Treasury officials said FBME helped organized crime and terror groups move money, evade sanctions and develop banned weapons. Deutsche Bank wasn’t accused of wrongdoing in the case.

The “mirror trades” scandal surfaced another issue: Warning bells sounded at the U.S. investigations unit after another European bank questioned some of the transactions, but the unit failed to follow up, according to an internal Deutsche report and a 2017 consent order issued against the bank by New York’s Department of Financial Services. Beyond that, the German bank didn’t even deem Russia to be at high risk for financial crime until late 2014 — much later than its peers — according to that 2017 order.

Accessory not After the Fact, but Complicit during Commission of the Crime.

You know, Corporations are fictional aggregations of money that are given permission by the State to operate and are a relatively recent development Historically. It is fully within the State’s power, particularly for criminal activity but in fact for any random reason (monopolistic practices and sheer bigness) that is politically acceptable, to revoke that permission and force dissolution and distribution or seizure of assets.

It’s called the “Corporate Death Penalty” and I am a staunch advocate.

They’re not really people. That’s just a line inserted a century and a half ago by a corrupt clerk.