Deutsche settlement over
Russia trades possible in 2017: sources
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[October 29, 2016]
By Kathrin Jones, Arno Schuetze and Karen Freifeld
FRANKFURT/NEW YORK (Reuters) - U.S. and U.K
authorities have made progress in their investigation into allegations
that Deutsche Bank <DBKGn.DE> helped its clients in Russia disguise
suspicious trades, and a settlement could come by the first half of next
year, people familiar with the matter said.
The U.S. Department of Justice, New York's Department of Financial
Services and the UK's Financial Conduct Authority each launched
investigations into the so-called Russian "mirror trades," which
allegedly involved clients using Deutsche Bank to buy securities in
rubles only to sell them shortly after in a foreign currency, Reuters
previously reported.
The bank has been making presentations to both U.S. and UK government
officials on its findings and discussions are expected to begin soon on
settlement terms, such as the size of a potential penalty, one of the
people said this week.
Deutsche Bank, the U.S. Justice Department, New York's Department of
Financial Services and the Financial Conduct Authority all declined to
comment on the matter.
The probe into suspicious equities trading in Russia is yet another
legal hurdle for Germany's largest lender, which is also in talks with
U.S. authorities to settle claims the bank misled investors in selling
mortgage-backed securities in the run-up to the financial crisis.
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The trades in question may have allowed Russian customers to illegally
move money from one country to another, in violation of money laundering
controls, people close to the matter have said.
People have said the probe was also looking into whether clients
transferred money in breach of Western sanctions on Russia over the
Ukraine conflict which went into effect in 2014.
But the focus of the probe is currently on alleged money laundering,
rather than possible violations of the Western sanctions, two people
familiar with the matter said this week.
Deutsche Bank said last year it was investigating certain equity trades
in Moscow and London, adding the total volume of the transactions under
review is "significant." It also cut back on its investment banking
activities in Russia last year.
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A green traffic light is seen next to the logo of Germany's largest
business bank, Deutsche Bank in Frankfurt, Germany, October 27,
2016. REUTERS/Kai Pfaffenbach
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Reuters reported that the bank had found a total of $10 billion of suspicious
trades in Russia, including $6 billion in mirror trades, citing people familiar
with the matter.
Germany's financial watchdog found no evidence to date that Deutsche Bank
violated money laundering rules in Russia in connection with the case, people
close to the matter told Reuters earlier this month.
While Bafin, the financial supervisory authority for Germany, generally asks
German lenders to improve internal procedures, it has no power to ask for hefty
fines - unlike regulators in the U.S. and UK, who have made Deutsche pay out
billions to resolve past missteps.
Deutsche Bank raised its provisions for all outstanding
legal cases to 5.9 billion euros from 5.5 billion euros in the third quarter,
without specifying for which cases. People close to the matter have told Reuters
that 1 billion euros of that has been set aside for the Russian case.
(Reporting by Kathrin Jones, Arno Schuetze and Alexander Hübner in Frankfurt and
Karen Freifeld in New York, Editing by Soyoung Kim and Andrew Hay)
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