New York state financial regulators said Tuesday that they have slapped Deutsche Bank with a $150 million penalty â€œfor significant compliance failuresâ€ in the bankâ€™s dealings with accused child sex trafficker Jeffrey Epstein, a now-dead investor, as well as with two client banks.
The New York State Department of Financial Services said that Deutsche Bank, which agreed to the payment under a consent order, â€œfailed to properly monitor account activity conducted on behalf of the registered sex offender despite ampleâ€ public information about Mr. Epsteinâ€™s earlier criminal misconduct.
The big settlement comes days after Epstein’s alleged procurer, Ghislaine Maxwell, was arrested on federal charges that accuse her of helping him get access to and groom underage girls so he could sexually abuse them.
The state said it was the first enforcement action by a regulator against a financial institution for dealings with Epstein.
The consent order covers Deutsche Bankâ€™s relationship with Epstein, and correspondent banking relationships with Danske Bank Estonia and FBME Bank.
Deutsche Bank maintained a relationship Epstein, as well as with â€œrelated individuals and entities from August 2013 until December 2018,â€ when the bank ended its dealings with him after the Miami Herald published a series of stories about a federal nonprosecution deal that Epstein obtained in 2008 in Florida. Over time, the German company handled more than 40 accounts related to Epstein and related people and entities.
The Financial Services Department said that because of the bankâ€™s oversight failure with Epstein, the “bank processed hundreds of transactions totaling millions of dollars that, at the very least, should have prompted additional scrutiny in light of Mr. Epstein’s history.”
Those transactions include payments to people who were publicly alleged to have been Epstein’s co-conspirators in sexually abusing young women, and settlements totaling more than $7 million and payments to law firms of more than $6 million â€œfor what appear to have been the legal expenses of Mr. Epstein and his co-conspirators,” the department said.
Other payments were made “to Russian models, payments for women’s school tuition, hotel and rent expenses, and (consistent with public allegations of prior wrongdoing) payments directly to numerous women with Eastern European surnames,â€ according to the department.
Also noted were Epstein’s “periodic suspicious cash withdrawals” in total, more than $800,000 over approximately four years,” the department said.
All of these transactions occurred in the months and years after August 2013, when, in preparation for Epstein’s accounts being shifted to Deutsche Bank, a junior relationship coordinator on the Epstein account prepared a memorandum for a relationship manager at the bank to be sent to the bankâ€™s then co-head of the wealth management Americas group and the chief operating officer of the wealth management Americas unit, the consent order notes.
That memo contained information about Epstein’s prior state sex crime case in Florida, noting he was charged with soliciting an underage prostitute in 2007, that he served 13 months of his 18-month sentence, and that Epstein was accused of paying young women for massages in his Florida home, the consent order said.
It also highlights that Mr. Epstein was involved in 17 out-of-court civil settlements related to his conduct in the 2007 conviction, the consent order said of the memo.
In an email to the two bank executives who included the memorandum as an attachment, the relationship manager â€œnoted how lucrative the relationship could be, stating â€[e]stimated flows of $100-300 [million] overtime [SIC] (possibly more)w/ revenue of $2-4 million annually over time,â€ the consent order said.
â€œIn the same email, [the bank’s relationship manager] proposed that all Epstein-related accounts be for ‘entities’ affiliated with Mr. Epstein, ‘not personal accounts,’ the consent order noted.
The order noted that banks are required to have anti-money laundering controls in place, and that they are also required to monitor their customers to prevent them from facilitating criminal activity.
State Financial Services Superintendent Linda Lacewell said in a prepared statement that â€œIn each of the cases that are being resolved today, Deutsche Bank failed to adequately monitor the activity of customers that the Bank itself deemed to be high risk.
“In the case of Jeffrey Epstein in particular, despite knowing Mr. Epstein’s terrible criminal history, the Bank inexcusably failed to detect or prevent millions of dollars of suspicious transactions,” Lacewell said.
The state Financial Services Department said it concluded that Deutsche Bank failed to monitor the activities of their bank clients, Danske Estonia and FBME, “with respect to their correspondent and dollar clearing business.”
The department noted that Danske Estonia is ‘at the center of one of the world’s largest money laundering scandalsâ€ and had control failures that led to large amounts of money being transferred on behalf of Russian oligarchs.
“Over the course of the years-long relationship between Deutsche Bank and Danske Estonia, Deutsche Bank was repeatedly put on notice of these failings and of the fact that few improvements were undertaken by Danske Estonia,” the department said.
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