Financial regulator Bafin has severely reprimanded Deutsche Bank for its huge shortcomings in preventing money laundering. By sending a special representative, one of the heaviest weapons was used. The mandate is about too expire, but it is indeed still too early for real relief.
November 21, 2023 was not a good day for Deutsche Bank and its boss Christian Sewing. The reason for this was a decision by the financial regulator Bafin, which then published it in February. In it the authority criticized persistent shortcomings in the prevention of money laundering and terrorist financing and threatened the institute with fines if it did not improve “data processing systems for transaction monitoring” as ordered. Simultaneously occurring, Bafin extended the mandate of a special representative it appointed.
Already in September 2018, the Bonn authority had appointed the auditing firm KPMG as the external supervisory body. The measure is considered one of the sharpest swords in the supervisors’ arsenal. The supervisory authority only resorts to this if a company is overwhelmed or is not willing to correct the reported deficiencies on its own initiative.
He used it for the first time ever at Deutsche Bank.Even after five years of special treatment the institute had still not made sufficient progress. This was notably embarrassing for Sewing because already when he took office in April 2018 he announced that the constant anger towards supervisors would finally end.
Bafin recently extended its tenure at Deutsche Bank until the end of October this year. In other companies,special representatives who had taken over in the meantime were withdrawn after a much shorter period of time.
Neobank N26 has lost its watchdogs again, as has payment service provider Unzer. Both companies communicated this with relief. So far, nothing has been heard from Deutsche Bank in this regard. Even when contacted, the institute did not want to comment and referred to bafin, which also did not want to comment.
End of KPMG mandates
However, a decision was made in favor of Sewing. According to financial circles, KPMG’s mandate would expire at the end of October.
The head of Deutsche Bank must have noticed this with relief. That’s why its experts can’t sit back.
Only recently the director of Bafin, Birgit Rodolphe, called on institutions to intensify their efforts in the fight against money laundering, which she called “the lifeline of organized crime”.
And elsewhere the special constellation remains the same temporarily. Due to the enormous technical problems associated with the integration of Postbank into Deutsche Bank’s IT systems, the supervisory authority appointed a second representative last autumn.
in the interest of consumer protection, the company should ensure that customer orders are processed within a reasonable period of time. Even though the number of complaints from those affected has normalized, it is still there. Bafin did not give a deadline for the end of the mandate.
Cornelius Welp he is a business correspondent in Frankfurt. He writes about it The bank, Insurance AND financial investors AND Pursue.
What are the implications of BaFin‘s actions against Deutsche Bank for the broader banking industry in Germany?
Interview between Time.news Editor and Financial Regulatory Expert
Time.news Editor (T.E.): Welcome to Time.news! Today, we’re delving into the recent actions taken by Germany’s financial regulator, BaFin, against Deutsche Bank for its significant failings in combating money laundering. I’m joined by Dr. Anna Fischer, an expert in financial regulation and compliance. Thank you for joining us, Dr. fischer.
Dr. anna Fischer (A.F.): Thank you for having me. It’s a pleasure to be here.
T.E.: BaFin has issued a severe reprimand to Deutsche Bank. can you explain what led to this decisive action?
A.F.: Certainly. deutsche Bank has faced numerous challenges regarding its anti-money laundering compliance over the years. BaFin conducted an examination that revealed systemic failures in the bank’s procedures, which ultimately meant that illicit funds could perhaps be funneled through the institution unchecked. They found that the bank’s existing controls were inadequate, prompting BaFin to take strict measures to ensure compliance.
T.E.: You mentioned systemic failures. How does this impact the bank’s operations and reputation moving forward?
A.F.: The implications are significant. First, operationally, the bank must now allocate substantial resources to improve its compliance systems to meet regulatory standards. This can lead to increased operational costs and potential delays in strategy implementation. Reputationally, this reprimand diminishes trust among clients and investors, which can affect stock prices and market confidence. In the long run, it’ll be crucial for Deutsche Bank to demonstrate that it has effectively addressed these shortcomings.
T.E.: You pointed out that BaFin dispatched a special representative to oversee compliance at Deutsche Bank. what does this involve, and why is it considered one of their “heaviest weapons”?
A.F.: Yes, appointing a special representative is a serious step for any regulator. It usually indicates that the regulatory body has lost confidence in the institution’s ability to self-correct. This representative will actively monitor the bank’s progress and ensure that reforms are being implemented effectively. This level of oversight can be very disruptive, placing additional pressure on the bank both from a regulatory outlook and from an operational standpoint.
T.E.: The mandate for this special representative is about to expire, but you’ve suggested that it might be too early for relief. What do you mean by that?
A.F.: While the mandate might potentially be nearing its end, the real challenge for Deutsche Bank lies in proving sustainable, long-term compliance. It’s crucial that the reforms and cultural changes within the bank are cemented, rather than merely superficial or temporary fixes. If problems remain unresolved or if there are further violations, BaFin could take even stricter actions in the future, which would be detrimental for the bank.
T.E.: This situation raises questions about the overall health of the banking sector in Germany. How does this issue with Deutsche Bank reflect on the industry as a whole?
A.F.: It’s a concerning signal. if a major institution like Deutsche Bank struggles with compliance, it raises questions about the effectiveness of regulatory oversight across the sector. Other banks may face similar challenges, and investor confidence might wane not just in Deutsche bank, but across the entire banking landscape. This situation necessitates a renewed focus on compliance, transparency, and risk management within the industry.
T.E.: Moving forward, what steps can Deutsche Bank and other banks take to improve their anti-money laundering practices?
A.F.: A multifaceted approach is needed. First, banks shoudl invest in robust training programs for employees to foster a culture of compliance. Additionally, upgrading technology to allow for better monitoring of transactions and red flags is essential. collaborating with regulators and other financial institutions to share best practices can enhance overall effectiveness in combating money laundering.
T.E.: Thank you, Dr. Fischer, for your insights into this critical issue. It’s clear that the path toward compliance and trust is a challenging journey for Deutsche bank and others in the sector.
A.F.: Thank you for having me. It will indeed be captivating to see how things evolve in the coming months.
T.E.: We appreciate your time and expertise. For our readers,stay tuned for more updates on this developing story and other financial news.