New York banking regulators have fined Deutsche Bank AG US$150 million for compliance failures stemming from its dealings with notorious sex offender Jeffrey Epstein.
The Department of Financial Services (DFS) announced that the bank agreed to pay the penalty to resolve allegations that it failed to properly monitor account activity by Epstein, a registered sex offender.
Due to the lack of oversight, the DFS said, Epstein was able to make payments to alleged co-conspirators in the sexual abuse of young women, to pay over US$6 million in legal expenses and over US$7 million in settlements with accusers, and to make payments to Russian models and other women “consistent with public allegations of prior wrongdoing.”
“Banks are the first line of defence with respect to preventing the facilitation of crime through the financial system, and it is fundamental that banks tailor the monitoring of their customers’ activity based upon the types of risk that are posed by a particular customer,” said DFS superintendent Linda Lacewell.
Epstein was found dead in a New York jail cell last year while awaiting trial on sex trafficking charges. He’d been convicted of sexual abuse charges in 2008 and became a registered sex offender in New York in 2010.
The regulators said that today’s agreement “marks the first enforcement action by a regulator against a financial institution for dealings with Jeffrey Epstein.”
The DFS also found that Deutsche Bank failed to properly monitor activities stemming from correspondent banking relationships with Danske Bank Estonia and FBME Bank.
“Danske Estonia, which is at the center of one of the world’s largest money laundering scandals, suffered from inherent control failures that resulted in large quantities of money being moved on behalf of Russian oligarchs,” the DFS said.
The DFS found that “Deutsche Bank failed to take appropriate action to prevent Danske Estonia from transferring billions of dollars of suspicious transactions through Deutsche Bank accounts in New York.”
The regulator said that the bank also overlooked concerns in its dealings with FBME.
“In each of the cases that are being resolved today, Deutsche Bank failed to adequately monitor the activity of customers that the bank itself deemed to be high risk. In the case of Jeffrey Epstein in particular, despite knowing Mr. Epstein’s terrible criminal history, the bank inexcusably failed to detect or prevent millions of dollars of suspicious transactions,” Lacewell said.
In a statement, Deutsche Bank CEO Christian Sewing said that taking Epstein as a client in 2013 “was a critical mistake and should never have happened.”
“We all have to help ensure that this kind of thing does not happen again. It is our duty and our social responsibility to ensure that our banking services are used only for legitimate purposes,” Sewing said. “That’s exactly why we should always examine things critically, ask questions and speak up.”