Compliance staff working for Deutsche Bank flagged at least $150 billion worth of transactions as potential money laundering transactions. According to Bloomberg reports, these employees were not taken seriously and were asked to focus on their tasks. One of the ex-compliance officers revealed this information to Bloomberg who was involved in reviewing transactions that the bank’s U.S. subsidiary handled for a tiny Estonian unit of Danske Bank A/S.
Former compliance officers when working for Deutsche Bank sought broader scrutiny of certain clients but they got a familiar response from higher authorities “focus on the transaction in front of you, file your paperwork and move on”. Deutsche Bank was used as the corresponding bank by Danske and the US watchdogs have made a number of inquiries with Deutsche Bank regarding the same.
Globally a significant number of Large Banks curtailed their corresponding banking relationships with the small banks in the wake of the money laundering risk. Large banks feared that they would be punished for the sins of the customers of other banks. JP Morgan Chase exited the Danske relationship in 2013, followed by Bank of America in 2015, however, Deutsche’s U.S. subsidiary kept handling Danske’s business after competitors quit the business of Danske.
KYCC Importance for Deutsche Bank
Failure of the correspondent banking relationships leads to the need of knowing the customers’ customers (KYCC). It helps to understand the risks. KYCC takes those requirements to the next level and looks at who your customers are doing business with, their sources of funds and their legitimacy, and the risk that these third parties are laundering money. Regtechtimes have built reports on the Non-Banking Finance Company portfolio of the banking companies, which helps the banks to understand the customers of the nonbanking finance company it is lending money.
Deutsche Bank India report compiled by Regtechtimes emphasizes the need for knowing the customer’s customers. It’s not only the legal compliance issue. It helps properly manage your institution’s risk, to protect against infiltration by illicit funds. These reports could be an essential part of the widespread compliance function of the bank.
