We're not even through the first month, and Deutsche Bank is about to cross the $8 billion fine threshold for 2017.
As part of a settlement with American and British regulators, Deutsche is gonna shell out a combined roughly $625 million in fines for providing profitable aid in legalized money laundering for Russian money. A consent order filed by the New York State Department of Financial Services contains a plethora of fun details about the $10 billion worth of mirror trades executed by Deutsche between 2011 and 2015.
Like this one...
Operating through the securities desk at Deutsche Bank's Moscow affiliate ("DB-Moscow"), certain companies that were clients of that desk routinely issued orders to purchase Russian blue chip stocks, always paying in rubles. The size of the typical order ranged in value from $2 to $3 million.
And once it had that order in hand, Deutsche would suddenly behave less like a disciplined trading desk and more like a Teutonic size queen...
Shortly thereafter - indeed, sometimes the very same day - a related counterparty would sell the identical Russian blue chip stock in the same quantity and at the same price through Deutsche Bank's London branch ("DB-London"). The counterparties to the trade were actually closely related on both sides, such as through common ownership.
Because the quantity was - oddly - all that mattered...
None of these "mirror trades" demonstrated any legitimate economic
rationale. The counterparties frequently lost money on these trades, due to fees and commissions that were substantially credited to DB-Moscow by Deutsche Bank pursuant to the brokerage arrangements between Moscow and London.
For example, typically, it made no difference to the counterparties the particular security to be bought or sold. All that mattered was that there was a matching trade available. In one instance, a counterparty representative, who was buying shares for one counterparty and selling the identical shares for a related counterparty, told a DBMoscow trader, "I have a billion rouble today... Will you be able to find a security for this size?"
And the consent order goes on to allege that, when mirror trades failed to materialize, Deutsche would also park money in other securities of equal size without any real obvious financial logic and also made a habit of working with sellers registered in tax havens. Perhaps the most Deutsche phrase in the whole order is that the bank also engaged in "One-legged trades." The DFS is also quite critical of how Deutsche overlooked so many red flags regarding client behavior that it essentially did the banking equivalent of marrying someone who doesn't speak to their family and has never introduced you to a single one of their friends.
But hey, at least Deutsche had an unimpeachable excuse for why no one looked more closely at why Russian clients were trying to move rubles using trading behavior based on zero amount of sense...
Subsequently, in light of the contradictory information about Counterparty
B received from two different components of Deutsche Bank (which did not communicate with each other), the European Bank contacted a senior Anti-Financial Crime ("AFC") employee at DBTCA who supervised special investigations, in an attempt to reconcile these concerns. The senior compliance employee never responded to the European Bank. Nor did the employee take any steps to investigate the basis for the European Bank's inquiry, later explaining this omission on the ground that the employee had "too many jobs" and "had to deal with many things and had to prioritize."
What isn't spoken of in the order -- but which hangs over it like a geopolitical albatross -- is that the bank holding an enormous amount of Donald Trump's debt has been caught acting naughty in the country that has become Trump's most glaring diplomatic question mark.
And we won't even go into how this latest fine will affect Deutsche bonuses going forward because apparently someone has gotten really sensitive about that kind of stuff and is acting like a real snowflake on social media.