Deutsche Bank fined for money laundering
Deutsche Bank has been fined by regulators in the UK and US over a money laundering scam in Russia. The total fine amount is $630 million. Clients had allegedly moved $10 billion out of Russia using shares from DB's Moscow, London and New York offices. US regulators fined Deutsche Bank's $425m while the UK's FCA's fine was $205m.
Deutsche Bank is a banking and financial services behemoth, headquartered in Frankfurt. The German bank was founded in 1870, to help boost trade between Germany and other nations. The bank later branched into other cities such as Shanghai, Buenos Aires and London before arriving in Russia in 1881. Now with branches across 70 countries, the bank has over 100,000 employees.
With the onset of algorithmic trading, wherein an automated system makes high volumes of a trade for the trader, mirror trading is more traditional. Known as copy trading, it involves a trader copying the trades of a winning trader. The trader can select from multiple strategies depending on their retirement, investment and speculative aims. This is especially popular in the forex market.
Money laundering refers to an individual or an organization concealing or disguising the origins of money that was obtained illegally, through drug trafficking or other illegitimate activities. They then deposit this money across scattered periods in financial institutions to make it appear legitimate.
Early last year, reports emerged on Deutsche Bank launching investigations into the trading activities of its Russian clients. The bank conducted probes on probable money laundering activities worth nearly $6 billion. The data was analyzed for the period 2011 to 2015. It was also reported that Tim Wiswell, who headed the bank's equities desk, was placed on indefinite leave in connection with the investigations.
The bank examined massive amounts of stocks that were purchased by Russian clients through the bank using Rubles, and soon afterwards mirrored the same trade in London for the same securities and the same amount, but in U.S. dollars.
After reports surfaced on allegations of nearly $6 billion suspicious trades clocked by the bank's Russian clients, the lender found another $4 billion to add to this kitty in December 2015. Most of the suspicious trades were categorized as "mirror trades". Investigators probed whether the bank's clients were moving illegal funds out of the country without proper authorization.
The head of the bank's equities desk, Tim Wiswell, had joined the bank in 2006. When the investigations threw questions on the authenticity of billions of dollars of trade through the equities desk, Tim Wiswell's role became significant. Many alleged that he had obtained bribes and had helped many of the bank's powerful Russian clients resort to money laundering.
Tim Wiswell, the man who steered Deutsche Bank's equities desk, is in the midst of judicial scrutiny over allegations of violating anti-money laundering laws. Now out of reach and contact, Wiswell is being blamed for the bank's downfall in Russia. After probes on his questionable trading activities, investigators unearthed $3.8 million in unaccounted funds, mostly related to mirror trades, in Wiswell's wife's bank account.
In 2014, the U.S placed multiple sanctions on Russian businessmen and certain organizations, after Russia took over Crimea. When the economy slipped, many powerful Russians wished to move their money out of the country and mirror trading proved to be the easiest way. After probes on Deutsche Bank's mirror trades, some money was found to originate from friends and relatives of Russian President Putin.
