Photographer: Alex Kraus / Bloomberg
Photographer: Alex Kraus / Bloomberg
Deutsche Bank AG agreed to pay more than $ 130 million to settle criminal and civil charges that it had bribed foreign officials and manipulated the precious metal futures market through a trading tactic known as spoofing.
The Frankfurt-based bank agreed to a deal in which she will not be prosecuted as long as she is not involved in the practices for the next three years and is not required to plead guilty to the charges. The case was filed by federal prosecutors in Brooklyn, New York and Washington, who secured a $ 920 million fine JPMorgan Chase & Co. last year, the largest ever sanction related to spoofing.
Major banks are rushing to negotiate legal deals ahead of the U.S. government change, partly out of concern that a Democratic president may face higher fines. Three top US banks agreed to pay more than $ 4 billion in settlements announced just before the November election, on issues ranging from bribery to market manipulation.
Deutsche Bank’s agreement with the Justice Department was confirmed at a distance hearing in federal court in Brooklyn on Friday. The bank will pay $ 80 million in criminal fines for violating the Foreign Corrupt Practices Act and an additional $ 5.6 million for commodity fraud, although the bank got credit for the latest fine for a previous settlement with the Commodity Futures Trading Commission.
‘Correcting measures’
In addition, Deutsche Bank will pay more than $ 43 million to the Securities and Exchange Commission to resolve a parallel civil suit against it for the bribery behavior. The SEC investigation found that it lacked adequate internal accounting controls from outside intermediaries, with $ 7 million in suspicious payments recorded as legitimate business expenses. Bank employees also falsified invoices and other documents, the SEC said.
“While we cannot comment on the specifics of the resolutions, we are taking responsibility for these past actions, which took place between 2008 and 2017,” Deutsche Bank spokesman Dan Hunter said in a statement. “Our thorough internal investigations and full cooperation with the DOJ and SEC investigations on these matters reflect our transparency and determination to put these matters in the past for good.”
The bank has “taken significant corrective action,” Hunter said, investing more than EUR 1 billion ($ 1.22 billion) in data, technology and controls, improving its training and increasing its global workforce against financial crime to more than 1,600.
Spoofers trick other investors into buying or selling by entering their own buy or sell orders with no intention of fulfilling them. That creates an artificial demand that drives prices up or down. Now that automated trading is common, the long-frowned upon practice has become a threat to the legitimacy of the market. Spoofing contributed to the flash crash of May 2010, when nearly $ 1 trillion was temporarily wiped out in the US stock market.
QuickTake: Spoofing is a silly name for serious market rigging
Traders argue that the crime is too difficult to distinguish from legitimate order cancellations. Prosecutors must prove that merchants intended to cancel their orders in advance.
Two Deutsche Bank traders, Cedric Chanu and James Vorley, were convicted in September of manipulating prices on gold and silver contracts. They were accused of entering false bids on contracts, canceling those bids before the orders were fulfilled, and taking advantage of the price fluctuations in between.
Bribes to ‘Consultants’
In the foreign bribery portion of the case, US says Deutsche Bank executives agreed to pay millions of dollars to “consultants” for investment managers in Abu Dhabi and Saudi Arabia who were basically bribes for brokers to bring in business .
In Abu Dhabi, the managers provided funding for an investment officer’s yacht and cash, totaling $ 3.5 million, which helped the bank win $ 35 million in fees.
In Saudi Arabia, payments were made to an entity controlled by the wife of an investment manager in exchange for overseeing hundreds of millions of dollars in family assets owned by a Saudi official. The payments totaled more than $ 1 million, including a loan of over 600,000 euros for the asset manager to buy a house in France.
In both cases, senior bank executives were aware of the payments, according to court records.
Deutsche’s Misery
Deutsche Bank’s legal troubles come on top of a long downward spiral of declining revenues, persistent fixed costs, reduced credit ratings and rising financing costs. The bank has paid more than $ 18 billion in fines for financial misconduct in the decade since the financial crisis.
In July, it agreed to pay New York’s bank regulator $ 150 million for a series of compliance lapses, including half a decade of lax oversight of convicted sex offender Jeffrey Epstein’s financial dealings.
The German authorities fined the company EUR 13.5 million in October for money laundering violations related to working with Danske Bank A / S. The bank has failed to provide timely warnings for suspicious transactions more than 600 times, Frankfurt prosecutors said at the time.
The case is US v. Deutsche Bank AG, 20-cr-584, US District Court, Eastern District of New York (Brooklyn).
– With help from Yalman Onaran
(Updates with details of agreement in fourth and fifth paragraphs and with specific amounts.)