Mnuchin vows probe of Deutsche Bank’s AML procedures

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WASHINGTON — A day after a Senate hearing on anti-money-laundering policy became dominated by allegations against Deutsche Bank, Treasury Secretary Steven Mnuchin said he will direct regulators to examine the bank's compliance with AML rules.

Congressional Democrats have called for greater scrutiny of Deutsche following a New York Times report alleging the bank failed to submit suspicious activity reports related to companies linked to President Trump and his son-in-law, Jared Kushner. The bank became a focal point of a hearing this week before the Senate Banking Committee.

Testifying before the House Financial Services Committee Wednesday, Mnuchin signaled that he takes the allegations seriously enough to justify further inspection. He told the panel banks' policies for submitting SARs should be applied equally for all actors.

“I am going to have [the Financial Crimes Enforcement Network] follow up and make sure that Deutsche Bank, as anyone else, has SARs policies that are on everyone,” Mnuchin said. Fincen is a bureau of Treasury.

His comments come after Fincen Director Kenneth Blanco told the Senate Banking Committee that he would not comment on whether the agency will probe the New York Times findings. The report said senior bank executives had quashed SARs prepared by compliance staff that were related to Kushner Companies, the Trump Foundation and other entities.

Mnuchin added that he would report back to the House panel to ensure that Treasury has done proper oversight of the bank's SARs compliance.

“I understand that we can’t comment publicly on SARs, but we will follow back with the committee to make sure that we have done a compliance oversight,” Mnuchin said.

Mnuchin further criticized Deutsche Bank’s investments in response to questions by Rep. Katie Porter, D-Calif., about a surprise $3 billion quarterly loss that the bank had reported. "How the hell do you lose $3 billion and not see that coming?" Porter said.

Mnuchin said he was "familiar with some of [Deutsche Bank's] really bad investments."

"I find it hard to believe that they made them but, yes, it’s a staggering amount of money, we would agree on,” he said.

Mnuchin testified to the committee for the second time in two months as House Democrats who control the Financial Services Committee are trying to advance their legislative and oversight agenda. The hearing was another opportunity for lawmakers to question Mnuchin after some were not able to ask him questions during an April hearing due to scheduling and time constraints.

The reports on Deutsche Bank’s alleged failure to report SARs have come as members of the House and Senate are negotiating reforms to AML laws. Much of the focus has been on a bill to require new companies to identify beneficial owners at incorporation in order to reduce the threat of bad actors hiding behind shell companies.

A beneficial owner requirement has bipartisan support in Congress, but some Republicans say it could pose undue burden on small businesses.

Rep. Patrick McHenry, R-N.C., the committee’s ranking member, expressed frustration with Fincen for failing to provide data to prove that the beneficial ownership legislation would aid law enforcement in combating illicit finance.

The House delayed a vote earlier this month on the bill to allow McHenry to get the information he requested from Fincen.

“The director of Fincen has yet to provide any data to justify the position to have a massive new collection of the ownership data of small businesses across America,” McHenry said.

“The briefing I received from Director Blanco and his team was quite frankly insulting,” he added. “It was anecdotal stories, no data in order to justify a substantial change in public policy. It would be infuriating under a Democrat administration for me to receive a briefing like that. It is even more infuriating when it’s a Republican administration not giving Republicans on the Hill any sort of decency of data.”

Mnuchin assured McHenry that Treasury would provide the data he is requesting.

“You have my personal assurance we will be responsive to you on a timely basis and make sure you have the data, so whatever your opinions are justified by data,” Mnuchin said.

Mnuchin also addressed cannabis banking legislation that the committee passed in March. The legislation, which would make it illegal for a federal regulator to penalize an institution that accepts insured deposits from state-approved cannabis businesses, is expected to pass the full House but faces obstacles in the Senate.

Mnuchin urged Congress to address the issue as states have begun to legalize cannabis for medical or recreational purposes but the substance still remains illegal on the federal level.

“This is an issue for Congress to decide,” Mnuchin said. “From our perspective, from Treasury, we are caught in the middle of this. … I would encourage Congress to address this issue. It is not in anybody’s interest to have this amount of cash on the streets.”

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