FCA sees issues in Deutsche Bank controls over financial crimes, FT reports

Thomson ReutersA statue is seen next to the logo of Germany’s Deutsche Bank in Frankfurt

FRANKFURT (Reuters) – Deutsche Bank has “serious” and “systemic” failings in its controls against money laundering, terrorist financing and sanctions, according to a confidential letter by the UK’s financial regulatory agency, the Financial Times reported.

The watchdog agency, the Financial Conduct Authority (FCA), has now ordered a separate independent review, the FT reported the letter as saying. The FCA declined to comment.

“Our overall conclusion was that Deutsche Bank UK had serious AML (anti-money laundering), terrorist financing and sanctions failings which were systemic in nature,” the FT quoted the FCA letter, dated March 2, as saying.

“Effective senior management engagement and leadership on financial crime had been lacking for a considerable period of time.”

Deutsche Bank said it is cooperating with regulators to fundamentally reform its anti-financial crime program.

“We understand the importance of this issue and are committed to and engaged in fixing it”, a company spokesman said in an emailed statement on Sunday.

In late 2014, the FCA had put Deutsche Bank’s London office under enhanced supervision owing to concern about the bank’s governance and controls. Enhanced supervision procedures are normally kept private and can follow fines.

Following its review, the FCA ordered a so-called skilled persons report – also called a Section 166 report – to assess remedial work Deutsche must now carry out, the FT reported.

Deutsche Bank’s new chief executive, John Cryan, who took over in July, has embarked on a deep restructuring of the bank, which includes an overhaul of governance procedures.

Cryan announced in November a review of its know-your-client mechanisms and its vetting procedures when taking on new clients. It has also suspended taking on new customers from 109 countries which it has defined as high risk, compared with 30 countries it had earlier classified as too risky.

The report on the FCA letter comes days after a public squabble among members of Deutsche Bank’s supervisory board and the ejection of the board’s member tasked with clearing up past scandals.

Germany’s biggest bank, struggling to extract itself from regulatory and legal tangles that have already cost it billions of dollars, announced late on Thursday the resignation Georg Thoma, a top financial lawyer who headed the supervisory board’s Integrity Committee [nL5N17W22O].

(Reporting by Arno Schuetze)

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