Sanctions Violation

Deutsche Bank’s Russia Problem

deutsche bank russia_reuters
A man walks near an office building that houses the Russian headquarters of Deutsche Bank, in Moscow.
  • Why it matters

    Why it matters

    The Russian probe could be one of the costliest for Deutsche Bank since the Libor rate-manipulation scandal was settled for €2.5 billion in April.

  • Facts

    Facts

    • U.S. and other regulators are looking into an alleged money-laundering ring that involved Deutsche Bank traders sending some $6 billion from Moscow to London.
    • The investigation has expanded to examine whether Deutsche Bank violated sanctions by aiding individuals close to Russian President Vladimir Putin.
    • Deutsche Bank, which is cooperating with the probes, is reportedly planning to close its entire investment banking business in Russia.
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    Audio

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Deutsche Bank’s actions in Russia have already had serious consequences for Germany’s largest bank. In fact, revelations of possible money laundering run out of its Moscow office may have been what finally cost co-chief executive Anshu Jain, who left in June, his job.

Now, it seems the news may be about to get worse. According to the Financial Times, an investigation by U.S. authorities into Deutsche Bank’s Russia dealings is set to be “massively expanded” to include a look at whether the German bank violated U.S. sanctions against trading with Russia.

The Russian scandal is just one of thousands of legal troubles that have plagued Deutsche Bank over the past few years, eating away at its profits and global reputation. John Cryan, the bank’s chief executive since July, was brought in partly to clean up the mess.

Before that clean-up can begin, it seems Mr. Cryan may have to pay another billion-dollar fine to settle the bank’s past dealings in Russia.

The U.S. Justice Department and New York’s Department of Financial Services have already been investigating the claims for months. Now, however, it seems investigators are also looking more closely at whether the bank’s traders violated U.S. sanctions that were imposed on Russia after its annexation of Crimea from Ukraine.

The Russian investigation involves some $6 billion worth of questionable trades between 2011 and the start of this year. The so-called “mirror trades” involved Russian customers buying securities in rubles, which Deutsche Bank’s London office would simultaneously buy back from them in dollars.

At the center of the broader U.S. investigation is Tim Wiswell, an American who led Deutsche Bank’s trading business in Russia.

It is undisputed that the trades continued into this year, which could make it damaging and costly because they apparently violate U.S. and E.U. sanctions imposed on Russia in 2014. Handelsblatt reported in August that the Russian investigation could be as serious as the Libor rate-setting scandal that cost the bank $2.5 billion.

The scandal has also led the German bank to rethink its entire operation in Russia. Handelsblatt reported over the summer that investment banking operations in the country are to be closed. Mr. Cryan is likely to announce the move – and a series of other cost-cutting measures – when he lays out his strategy for the bank’s future later this week.

At the center of the broader U.S. investigation is Tim Wiswell, an American who led Deutsche Bank’s trading business in Russia. Mr. Wiswell has already been suspended by Deutsche Bank, which conducted its own investigation into the affair. He is now suing the bank for compensation.

The Russian clients involved may also have included individuals with ties to Vladimir Putin, Russia’s president, who were on the U.S. sanctions list. They reportedly include the brothers Arkady and Boris Rotenberg. The former is Mr. Putin’s long-time judo partner, and both are on the sanctions list.

A Deutsche Bank spokesperson in New York said only that the bank continues to investigate the connections between its trading business with clients in Moscow and London. The bank has alerted authorities in Germany, Russia, the United States and Britain, and was taking internal steps as well.

But even if Mr. Wiswell has already been suspended, his role in the scandal could prove troubling for the bank. U.S. authorities are reportedly investigating whether his involvement means that other top managers may also have cleared the transactions, according to the Financial Times.

 

Astrid Dörner is a Handelsblatt correspondent covering finance from New York. Christopher Cermak of Handelsblatt Global Edition in Berlin also contributed to this story. To contact the author: adoerner@handelsblatt.com

 

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