Deutsche Bank, the German multinational investment bank, is the latest big-name financial organisation to face a fine from the US Federal Reserve (Fed) for insufficient anti-money laundering (AML) progress. The Fed has fined Deutsche Bank $186million, adding to a number of previous fines of $58million in 2015 and $41million in 2017 for the same offence.
In 2015, the Fed ordered Deutsche Bank to fix its AML policies as it was uncovered that the German investment bank had been completing transactions with countries sanctioned by the US. Two years later, the bank was once again in the firing line of the US regulator. The second penalty came as the Board identified failures by Deutsche Bank’s US banking operations to maintain an effective program to comply with the Bank Secrecy Act and anti-money laundering laws.
Now the German investment bank is facing its largest penalty yet, as the Federal Reserve has deemed the bank’s AML progress insufficient. The consent order from 2017 required Deutsche Bank to “improve its senior management oversight and controls related to compliance by the US banking operations with anti-money laundering laws”. The new consent order from the regulator states the bank must prioritise the completion of several critical requirements of the prior orders.
Furthermore, Deutsche Bank’s involvement with the Estonian branch of Danske Bank, has also played a part in inflating the penalty. In late 2022, the Danish Bank was forced to pay a forfeiture of $2billion as the Estonian branch was funneling money for bad actors enabling them to gain unlawful access to the US financial system.
In addition to its fine and consent order, the US regulator has announced a Written Agreement to address other general deficiencies relating to Deutsche Bank’s governance, risk management, and controls.
Shockwaves across the fintech industry
James Allen, founder of Billpin.com
To understand the impact this fine is having on the fintech sphere, we reached out to industry experts. James Allen, founder of Billpin.com, the financial advisor, explains the ripple effect this action by the Fed will have on the rest of the market.
“The fines on Deutsche Bank by the Fed aren’t just a wake-up call for traditional banks, but a spotlight on fintech as a whole. When a giant like Deutsche gets hit with repercussions, it sends shockwaves through the industry. It’s like throwing a stone in a pond – the initial splash is local, but the ripples affect the whole pond. Similarly, fintech startups and veterans alike will now face more scrutiny. It shows that while innovation matters, compliance can’t fall by the wayside.
“To avoid future fines, fintechs need to find balance between being agile and adhering to rules. It’s like driving a sports car – you’ve got power to speed, but you must know when to hit the brakes. Fintechs often prioritise fast growth and innovation, sometimes overlooking regulations. In real life, I’ve seen companies boom then bust due to compliance issues.
“The key is baking in regulatory compliance from day one. Regular audits, ongoing training, and a culture respecting innovation and rules are essential. Remember, it’s not about dodging fines; it’s about building trust.”
Gaps in the regulatory market
Yaron Hazan, VP regulatory affairs at ThetaRay
Yaron Hazan, VP regulatory affairs at ThetaRay, an AI-powered AML provider for banks and fintechs, looks at how technology can ease regulatory burdens so other organisations don’t suffer the same fate as Deutsche Bank.
“Deutsch Bank’s fines, as well as the recent collapse of banks and the sanctions against the crypto market all highlight the gaps between the strictness of the regulatory environment in the US and common risk management standards, Within the AML landscape the distance between effort invested and outcomes is almost outrageous. Even the regulators themselves state that they need to adapt less conservatives approach, including the usage of new technologies. Especially those that utilise AI effectively and efficiently.
“It is critical to look at the Fed’s fine of Deutsche Bank as part of a much larger issue of using technology to ease the regulatory burden but enable safe and transparent financial transactions around the world.”
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