Deutsche Bank’s 1MDB probe adds to lengthy list of legal issues

Deutsche Bank says it is cooperating with the authorities in all the probes. (Facebook pic)

FRANKFURT:Deutsche Bank AG chief Christian Sewing had barely finished relaying the news about his huge restructuring to investors and the bank’s embattled employees when a fresh set of reputational woes surfaced.
The US Department of Justice is investigating Deutsche Bank as part of a broadened probe of scandal-plagued 1MDB, a person with knowledge of the matter said.

While authorities have not accused Deutsche Bank of wrongdoing, it’s an unwelcome development for Sewing, who has said that the firm has stabilised and that it’s past the bulk of its legal issues.

In another blow to the bank’s image, it was revealed that Jeffrey Epstein had been a recent client of Deutsche Bank. The lender is said to have severed business ties with the financier earlier this year, just as US authorities were preparing to charge him with operating a sex-trafficking ring of underage girls.

Deutsche Bank has faced almost US$18.3 billion in fines and legal settlements since the start of 2008. That’s the biggest bill for any European bank after Royal Bank of Scotland Group Plc’s US$18.5 billion, according to calculations by Bloomberg.

The German bank still has another 1.1 billion euros set aside for future disputes and penalties.

Here’s a look at some of the probes Deutsche Bank still faces, according to its latest filings and people familiar with the matter. The German lender says it’s cooperating with authorities on all of these issues.


DoJ investigators, who have spent years examining Goldman Sachs Group Inc’s lucrative dealings with the fund, are now taking a closer look at a former Goldman executive who later worked at Deutsche Bank, said the person familiar with the matter, who asked not to be identified discussing the confidential inquiry.

The inquiry aims to determine whether Deutsche Bank might have violated foreign-corruption or anti-money-laundering laws as it helped 1MDB raise US$1.2 billion in 2014, according to the Wall Street Journal. The German bank pointed to asset-forfeiture documents previously filed by the DoJ indicating that 1MDB misled Deutsche Bank during transactions.

Danske Bank A/S

The German bank has said several authorities have asked it for information in what has become one of the world’s biggest money laundering scandals – questionable funds at the Estonian arm of Denmark’s Danske Bank. But in a sign that Deutsche Bank doesn’t expect a penalty for how it may have handled any funds, it says it hasn’t established a financial provision or even a contingent liability for the matter.

Panama Papers

A high-profile raid last year embarrassed Sewing as media broadcast images of police cars outside the bank’s twin skyscrapers. Frankfurt prosecutors are probing whether Deutsche Bank helped set up offshore companies in tax havens and failed to report suspicions that money could have been obtained illegally.

Deutsche Bank has said that it found no indication of misconduct by staff, and doesn’t list the matter in the legal risks section of its annual report.

Sovereign bonds

Did Deutsche Bank manipulate markets for sovereign, supranational and agency bonds? The bank says it has received inquiries from regulatory and law enforcement authorities and that it faces civil litigation.

It recorded a provision after agreeing to one settlement, but hasn’t disclosed whether it has money set aside or contingent liabilities for others.

US Treasuries

Was there misconduct in the way Deutsche Bank handled auctions, trading and market activity related to Treasuries? The bank says it has received inquiries from regulatory and law enforcement authorities. Deutsche Bank hasn’t disclosed whether it has established a provision or a contingent liability.

Mirror trades

In 2012-14, Deutsche Bank’s money-laundering controls failed when clients moved billions of dollars out of Russia using equity trades in Moscow and London that offset one another. The DoJ and other authorities are looking into the matter.

The bank has already paid about US$670 million in fines to other agencies and has recorded a provision for the remaining investigation.

Hiring practices

Did Deutsche Bank comply with US law when hiring staff referred by clients, potential clients and government officials, potentially to win business? The DoJ and Securities and Exchange Commission are among authorities that are taking an interest, according to the bank, which says it has recorded a provision for some of the investigations.

JPMorgan Chase & Co has paid a fine to resolve similar inquiries.

Currency trading

Did Deutsche Bank manipulate foreign exchange markets? The company has already paid more than US$340 million in fines to authorities and says it continues to face investigations by regulatory agencies.

The bank wasn’t part of group settlements with regulators and its fines were lower than those of several other banks. Deutsche Bank also faces civil litigation, but hasn’t disclosed whether it has money set aside for these matters.

Libor (and Euribor and Tibor)

Is there even more damage to come from rigging-scandal-plagued benchmark lending rates? Deutsche Bank has already paid more than US$3.5 billion in fines to other authorities, including the largest settlement by any bank so far in the matter.

It says it continues to face investigations by regulatory agencies, but hasn’t disclosed whether it has made provisions. Deutsche Bank also faces civil litigation.

US mortgage bonds

Even after a US$7.2 billion settlement with the DoJ in 2017, Deutsche Bank has yet to conclude its role in the industrywide probes on bonds blamed for exacerbating the financial crisis. The lender says it has received subpoenas and requests for information from regulators and government entities.

The bank has recorded provisions for some of the investigations. It also faces civil litigation and has set aside money for some of the cases.