German authorities raid Deutsche Bank in money laundering investigation

Germany’s federal police office, criminal prosecutors and the country’s financial watchdog BaFin raided Deutsche Bank’s headquarters in Frankfurt on Friday, prosecutors said in a statement.

The prosecutors said that a search warrant was issued by Frankfurt’s district court, based on the suspicion that unnamed Deutsche Bank employees may have violated anti-money laundering laws. They declined to give further details.

Deutsche Bank confirmed the raid and said it was linked to suspicious activity reports issued by the bank that flagged potential money laundering, adding that it was “fully co-operating with the authorities”.

One person familiar with the police investigation told the Financial Times that the raid was over a payment by Rifaat al-Assad, an uncle of the Syrian president; he was sentenced to four years in prison over money laundering in France last year. Assad was not a client of Deutsche Bank, but the German bank about five years ago had cleared at least one payment on behalf of a lender where Assad had an account.

Deutsche’s corporate bank offers correspondent banking services to other lenders. In such transactions, it acts as middleman, clearing cross-border money flows between banks.

The payment was spotted by Deutsche Bank when it screened its data for Assad-linked transactions after its sentencing in France, and it was subsequently reported to Germany’s anti-money laundering authority. The Assad connection was first reported by Handelsblatt.

Other people told the FT that the raid was over potentially suspicious money that Deutsche cleared as a correspondent bank, but did not confirm the identity of the individual involved.

The raid was triggered by the late filing of the transaction, with criminal prosecutors suspecting the lender may have violated its legal obligations by not reporting them earlier, the people said.

The raid is a blow for chief executive Christian Sewing who promised to put an end to Deutsche’s long history of legal and misconduct woes after his promotion to the top job four years ago. “In recent years, we have reduced our legal risks significantly,” he said in 2019, adding that the bank spent “a lot” to beef up its internal controls. “We are constantly improving and will not make any compromises.”

Shares in Deutsche Bank fell almost 3 per cent on the news but mostly recovered by early afternoon.

The raid was unrelated to a suspicious activity report Deutsche Bank had filed over a € 160,000 payment made by a client to one of its most senior bankers in 2018, other people familiar with the matter told the FT. Back then, Asoka Wöhrmann, then head of Deutsche’s private client business in Germany, received the money from Frankfurt-based entrepreneur Daniel Wruck, the Financial Times reported in January.

The men later explained that the payment was part of a failed attempt to buy a Porsche. Wöhrmann has since become chief executive of asset manager DWS and is under investigation by Deutsche Bank over that transaction as well as the alleged use of a private email address for business purposes.

In recent years, Deutsche Bank has been persistently under fire from regulators over inept anti-money laundering controls. A year ago, BaFin again ordered Deutsche Bank to do more to fix its controls in that area. Back then, Germany’s financial watchdog broadened and extended the mandate of consultancy KPMG, which it installed as special representative in September 2018 to monitor the lender’s progress on tightening up its internal controls.

BaFin also urged the country’s biggest bank to put in place “further appropriate internal safeguards” and to “comply with due diligence obligations”. Without going into details, BaFin said the lender needed to tackle shortcomings “in particular with regard to regular customer reviews” but also in its “correspondent [banking] relationships and transaction monitoring ”.

In November 2018 Deutsche Bank was searched by 170 police officers, prosecutors and tax inspectors over alleged money laundering in a raid that hit the bank’s shares.

Then, investigators were focusing on suspicious transactions in the bank’s wealth management division between 2013 and 2018. The criminal investigation into the case was later dropped, but Deutsche Bank paid € 15mn for shortcomings in money-laundering controls.

In October 2020, Frankfurt prosecutors fined the bank € 13.5mn for the belated reporting of suspicious transactions it processed for Danske Bank’s Estonian branch.

The lender subsequently announced an organizational revamp of its anti-financial crime unit, putting its chief administrative officer Stefan Simon in charge. In an interview with the FT last year, Simon acknowledged that competitors had started to boost their anti-financial crime controls earlier than Deutsche.

“We were lagging behind and have been catching up for a while now,” he told the FT. He kicked off a fundamental overhaul of the bank’s compliance, centralizing the department in the lender’s Frankfurt headquarters and replacing almost half of the control functions’ senior staff, including its group anti-money laundering officer. Deutsche also earmarked an additional but undisclosed sum for the compliance overhaul.

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