Per Reuters, the investigation by the U.S. Department of Justice (“DoJ”) related to Deutsche Bank’s DB involvement in the 200 billion euro ($220 billion) Danske Bank money-laundering scandal has progressed in recent weeks. In the latest move, U.S. regulators are enquiring the bank’s role in transferring bad money from Denmark's largest bank — Danske — to the United States.
Deutsche Bank is suspected to be involved in processing potential payments at Danske Bank, which is at the heart of Europe’s one of the biggest money laundering scandals. However, if the German lender is proven guilty, it will be slapped with severe financial penalties.
Per the source, DoJ officials and Estonian prosecutors, who have been working together for a year, are now cooperating with Frankfurt state prosecutors to resolve the matter. Further, the spokesman at Danske is continuing in full cooperation with authorities in Estonia, Denmark, France and the United States.
However, the DoJ and Frankfurt state prosecutors refrained from commenting on the U.S. investigation. Per Deutsche Bank's spokesman, the bank is working on improvising its internal controls in recent years. "We have repeatedly stressed that we are in a good and constructive exchange with the authorities," he added.
Now let’s dig a bit deeper in to what Danske Bank scandal is all about.
The Danske Bank scandal refers to almost $220 billion in transactions that were processed by its Estonian branch during 2007-2015. In September 2018, it was revealed that a whistleblower report related to the matter had been sent to its executive board, group compliance unit and internal auditor as early as December 2013.
While no proper investigation was conducted by Danske Bank, measures were undertaken to bring its Estonian business under control, which were insufficient. Thus, the company’s CEO Thomas Borgen resigned following all these revelations.
Last year, the Justice Department sought some information from Deutsche Bank associated with Danske transactions, as it was perceived the probe was totally on Danske and not the German bank. However, recently, the bank’s failure in providing information related to certain suspicious transactions on time extended the DoJ probe into Deutsche Bank’s role in such Danske trades.
Apart from Deutsche Bank, two major U.S. banks — JPMorgan JPM and Bank of America BAC — are also suspected to be involved in processing transactions at Danske Bank in Estonia. Though the banks have ended their financial relationships some time back, the DoJ has asked for more information from these two in 2018.
In 2018, ING Groep NV ING was fined $900 million by the Dutch authorities for violating laws related to preventing money laundering and financing terrorism. While admitting these allegations, the company in a statement noted, “The shortcomings identified resulted in clients having been able to use their bank accounts for money laundering practices for years.”
For Deutsche Bank, this scandal is an addition to its growing list of concerns. Dismal earnings, a tough operating backdrop and top-level management changes are some of the other major matters that have been dampening the company’s financials.
Currently, Deutsche Bank carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Over the past year, shares of Deutsche Bank have plunged 23.2% on the NYSE compared with industry’s decline of 3.5%.
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