German regulator BaFin has ordered Deutsche Bank to improve its money laundering and terrorism financing controls.
What’s more, the regulator has also taken the unprecedented step of appointing a special representative to report on the implementation of anti-money laundering measures.
Deutsche’s auditor KPMG has been awarded the mandate, with a reporting timeline of three years.
BaFin wants the German lender to establish appropriate internal safeguards and comply with general due diligence obligations following an internal review conducted by Deutsche in July.
The bank found shortcomings in its ability to fully identify clients and their source of wealth, according to a Reuters report.
In response to BaFin’s notice, Deutsche said that it is committed to complying with know-your-customer (KYC) regulations.
‘We are in agreement with the BaFin that we have to improve these processes in the corporate and investment bank further. The bank will work together with the BaFin and the special representative KPMG to fulfil the regulatory requirements as soon as possible and within the given time frame,’ the firm said in statement.
Deutsche has been encouraging cross-referrals and coordination efforts between its wealth management and investment banking divisions since 2008. So, a clean-up of the investment bank could potentially have an impact on private banking protocols.
The firm has been implicated in several money laundering cases in the past decade. Last year, it was fined over $630 million by UK and US authorities for allegedly helping wealthy Russian clients launder $10 billion.
It was also investigated for conducting nearly $11 billion worth of dollar-clearing transactions for US-sanctioned Burmese, Iranian, Syrian, Libyan and Sudan financial institutions in 2015.
Deutsche has already made some efforts to improve its KYC processes. In 2017, it implemented a new KYC program in each of its offices to detect high-risk clients, such as politically exposed persons. It also rolled out an extended screening program for existing clients as part of its due diligence on customers.
More recently, the bank promoted global head of enterprise risk management, Stephan Wilken, to group head of anti-money laundering, effective 1 October.
Wilken replaces Philippe Vollot, who has been named chief compliance officer for Denmark’s Danske Bank, which is also dealing with money laundering allegations.