Deutsche Bank agreed to pay $26.25 million to settle a class-action lawsuit filed by a group of the bank’s investors over anti-money laundering (AML) compliance failures and deficiencies related to certain clients, including Jeffrey Epstein and Danske Bank’s Estonia branch.
The proposed settlement, filed Friday in U.S. District Court for the Southern District of New York, covers the period from March 2017 through September 2020. U.S. District Judge Jed Rakoff, who allowed the class action to proceed in June, still must approve the settlement.
Through a spokesman, Deutsche Bank declined to comment. The bank denied wrongdoing in agreeing to settle.
The allegations made in a July 2020 complaint by lead plaintiff Yun Wang and named plaintiff Ali Karimi centered around Deutsche Bank failing to disclose it had not “remediate[d] deficiencies related to AML, its disclosure controls and procedures and internal control over financial reporting, and its U.S. operations’ troubled condition” and failed to “properly monitor customers that the bank itself deemed to be high risk.” Those customers included convicted sex offender Epstein and two correspondent banks, Danske Estonia and the Federal Bank of the Middle East (FBME Bank), “which were both the subjects of prior scandals involving financial misconduct.”
The complaint stated these issues were likely to have a material negative impact on the bank’s financial results and reputation, and that the bank’s public statements regarding supposed improvements to its AML program were “materially false and misleading at relevant times.”
The complaint named current Deutsche Bank Chief Executive Christian Sewing, CFO James von Moltke, and former CEO John Cryan as defendants.
The complaint noted several regulators had already made similar allegations. The Federal Reserve sharply criticized Deutsche Bank’s U.S. operations in May 2020 in an audit, according to media reports at the time, which concluded the bank had not addressed “multiple concerns identified years earlier” related to the bank’s AML and other control procedures.
In July 2020, the New York State Department of Financial Services (NYDFS) fined Deutsche Bank $150 million for “significant compliance failures in connection with the bank’s relationship with Jeffrey Epstein and correspondent banking relationships with Danske Bank Estonia and FBME Bank.” The plaintiffs filed their complaint, making many of the same claims the NYDFS made against the bank, a week later.
The issues at Danske Bank and FBME Bank also revolved around poor AML internal controls.
During a nine-year period from February 2007 up until the end of January 2016, Danske Bank failed to spot an estimated 200 billion euros (U.S. $192 million) of illicit funds from countries including Azerbaijan, Moldova, and Russia were being laundered through its Estonia branch.
In 2015, the U.S. Treasury’s Financial Crimes Enforcement Network severed FBME Bank’s access to the U.S. financial system after it concluded the bank had facilitated “money laundering, terrorist financing, transnational organized crime, fraud, sanctions evasion, and other illicit activity internationally and through the U.S. financial system.”