Deutsche Bank is so consistently mired in scandal that it’s almost impossible to keep all of the myriad civil lawsuits and criminal investigations straight. And while Congress ramps up its scrutiny of the embroiled German lender and its ties to the Trump family, the New York Times dropped a lengthy report late Wednesday claiming that federal authorities are leading a wide-ranging money laundering probe into the bank.
The NYT report, which cited a whopping seven people familiar with the investigation. And though the report was surprisingly short on details given its length, it did once again familiarize us to a new character in the Washington drama: Whistleblower Tammy McFadden, who publicly criticized the company’s AML systems.
Anybody who has been following the reporting on DB since the beginning of the year is probably already familiar with the allegedly egregious compliance rule, and the fact that most of the bank’s compliance staff were shunted to the Jacksonville Office, where they were treated like they were “one step above custodial staff’.
From what we can tell, McFadden first attracted unwanted attention within the bank when she flagged activity involving Jared Kushner’s family back in 2016. The FBI soon became involved, though federal officials reportedly expanded the probe to cover – that’s right – activity involving Russian money launderers.
Congress is investigating the Trump angle, and right now, it appears the Feds are looking into other alleged ‘misconduct’.
Ms. McFadden, a former compliance specialist at the bank, told The New York Times last month that she had flagged transactions involving Mr. Kushner’s family company in 2016, but that bank managers decided not to file the suspicious activity report she prepared. Some of her colleagues had similar experiences in 2017 involving transactions in the accounts of Mr. Trump’s legal entities, although it was not clear whether the F.B.I. was examining the bank’s handling of those transactions.
The same federal agent who contacted Ms. McFadden’s lawyer also participated in interviews of the son of a deceased Deutsche Bank executive, William S. Broeksmit. Agents told the son, Val Broeksmit, that the Deutsche Bank investigation began with an inquiry into the bank’s work for Russian money launderers and had since expanded to cover a broader array of potential misconduct at the bank and at other financial institutions. One element is the banks’ possible roles in a vast money-laundering scandal at Danish lender Danske Bank, according to people briefed on the investigation.
The Feds have since expanded to cover a broader array of misbehavior – though, again, the exact nature of the investigation isn’t quite clear. Several other DB employees, aside from McFaddden, told the NYT that the bank regularly ‘rushed’ them to finish their reports when they flagged suspicious client activity. To be sure, this investigation is literally the last thing DB needs. After its merger with Commerzbank unraveled, DB promised shareholders that it would finally restructure and move ahead with large cuts, including shuttering most or all of its US equities business, and other trading businesseslk
The bank is also lumping some €50 billion in toxic assets and businesses into a ‘bad bank’ as a prelude to the inevitable government bailout.
But while DB struggles with investigations in Europe and Frankfurt over money laundering involving shadowy Russians and wealthy clients of the Panama Papers law firm, one thing is becoming increasingly clear: Expect another wave of expensive settlements to destabilize one of the world’s most vulnerable banks.