The City will always be a laundry if no one acts on red flags
JIM ARMITAGE
Talk to many bankers about anti-money-laundering safeguards and they’ll tell you they’re complianced up to their ears.
“AML” has burgeoned from one man and a dog in a cupboard by the bogs to whole floors in Canary Wharf, they’ll say. And they don’t tend to like it much.
If you let them go on, they’ll explain how the Financial Conduct Authority is constantly on their backs about it, too. Getting in the way of business.
So, if that’s the case, how come Deutsche Bank in London allowed itself to be used by its Moscow staff to run a trading scam laundering billions of dollars in roubles out of Russia for five years to 2015?
More pertinently, why did nobody high up in the bank, or in the City regulator, take any notice when a leading Russian business paper reported on the peculiar mirror trading scam in 2011?
And, while we’re at it, how is it nobody did anything when the Moscow office itself warned compliance in 2014 that it was “strongly convinced” certain clients were part of a money-laundering scheme?
In the light of these and other massive red flags over the years, it seems bizarre, to put it kindly, that the FCA praises Deutsche for coming forward so promptly to confess its sins and co-operating.
And, boy, are those sins grave. So many, you barely know where to look. Despite the fact that everyone knows corruption is a major problem in Russia, causing many other financial groups to pull out years earlier, Deutsche’s operation in London handled trades from its Moscow branch with barely any checks on who the customers were at all. Belize-based shell company? No problem. Virgin Islands? That’ll do nicely.
Checks weren’t made despite the fact the bank had identified that its Know Your Customer procedures in Russia were worse than in all of the 28 countries in which it operates around the world.
Much of the blame for questions not being asked in London is put on the complicated management structure at the bank which left responsibilities unclear. Its compliance department was starved of resources. Of course, that is the bank’s fault first and foremost, but why wasn’t that spotted by the FCA in its spot checks? After all, as the regulator notes, clear guidance on this stuff has been around since 2007 and was updated in 2014.
For all the AML box-ticking bankers complain of, in this case, the new rules clearly haven’t worked. You have to wonder if they’re fit for purpose.
Just as London’s reputation was recovering from the banking scandals of the financial crisis, Deutsche has left another stain on our financial system. And the City’s reputation in countries such as Russia as Moneylaundering Central lives on.
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