Deutsche Bank AG will pay a $186 million penalty after a Federal Reserve investigation found that it failed to put in place sufficient measures to prevent money laundering after earlier violations.
As part of the settlement, the German lender also agreed to step up risk management and governance. The Fed said its findings related to "unsafe and unsound practices and violations" of previous agreements with the central bank related to the lender's prior relationship with the Estonian branch of Danske Bank.
The rebuke is the latest dust-up for the German lender with U.S. regulators. Over the past several years, the firm has been the subject of other Fed orders on how the company manages risks. Deutsche Bank shares rose 1.6% on Wednesday in Frankfurt trading. They're still down 5% this year.
In a statement, Deutsche Bank said that it had taken steps to improve controls and that the settlement relates to "our historic tardiness in adhering to older enforcement actions and agreements." The firm said that it was poised to exceed regulators' expectations going forward.
More broadly, CEO Christian Sewing has been trying to turn the page on a series of scandals and regulatory run-ins that have plagued the bank in recent years. While Sewing has resolved several legacy issues, new problems keep cropping up that leave him little choice but to abandon cost-cutting targets and spend instead on remediation.
In an order released on Wednesday, the Fed said exams and investigations found Deutsche Bank hadn't made enough progress in its efforts to address previous allegations. In particular, the firm fell short in boosting its "compliance oversight, customer due diligence, transaction data, monitoring and filtering, as well as suspicious activity reporting, and facilitating independent third-party reviews."
The central bank said the firm made some progress, but still had exposure to heightened levels of compliance risk without sufficient internal control.
Without admitting or denying the Fed's allegations, Deutsche Bank agreed to take a series of steps to bolster its risk management program and anti-money-laundering controls.
Deutsche Bank recently named management board member Stefan Simon, who oversees regulation and compliance, to succeed Christiana Riley as Americas head. The appointment is the first time that the lender's highest-ranking compliance official will be based in the U.S.
