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Deutsche Bank has agreed to pay the state of New York a $150 million penalty for "significant compliance failures" related to its dealings with now-dead convicted sex offender Jeffrey Epstein, the State Department of Financial Services announced Tuesday.
Why it matters: Deutsche Bank "failed to properly monitor account activity conducted on behalf of the registered sex offender despite ample" public information about Epstein's criminal history, according to regulators. It's the first time any financial institution has been penalized for its dealings with Epstein.
The big picture: The bank allowed Epstein to make "hundreds of transactions totaling millions of dollars that, at the very least, should have prompted additional scrutiny," according to regulators. Those include:
- Payments to people who were publicly alleged to have been co-conspirators with Epstein in sexually abusing young women.
- More than $7 million in settlements and more than $6 million in payments to law firms "for what appear to have been the legal expenses of Mr. Epstein and his co-conspirators."
- More than $800,000 in "periodic suspicious cash withdrawals" over a four-year period.
- Payments "to Russian models, payments for women's school tuition, hotel and rent expenses, and (consistent with public allegations of prior wrongdoing) payments directly to numerous women with Eastern European surnames."
Worth noting: The settlement was agreed to under a consent order which also acknowledges that Deutsche Bank "failed to properly monitor the activities" of its foreign banking clients, Danske Bank Estonia and FBME Bank.
- Danske's "inherent control failures" led to money being transferred on behalf of Russian oligarchs, according to the regulatory agency.
- Meanwhile, Deutsche failed "to act on red flags" related to its dealings with FBME Bank, which it considered to be a high-risk client.
What they're saying: "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," said New York Financial Services superintendent Linda Lacewell.
- "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."
The other side: "The DFS settlement reflects our unreserved and transparent cooperation with our regulator. It also shows how important it is for us to continue enhancing our anti-financial crime capabilities," Deutsche Bank wrote in a statement about the settlement.
- "We have invested over $1 bn in improving our training, controls and operational processes, and have increased our AFC team to more than 1,500 people. Our transformation continues."