Frankfurt Deutsche Bank has to pay a fine of 8.66 million euros for insufficient controls. The background to this is the deficiencies in the controls used to set the Euribor reference rate. Bafin announced on Wednesday that the bank “temporarily did not have effective systems, controls and safeguard strategies in place,” which is required by European regulation to prevent Euribor’s manipulation.
Reference interest rates such as Libor or Euribor refer to the conditions under which banks lend to each other. Financial transactions of several hundred trillion dollars per day are linked to these reference prices, which means that profits can be made even with small moves.
The bank confirmed that the Bafin penalty affects the institute’s internal controls, but there are no indications that these shortcomings have led to incorrect reporting in the Euribor account – and thus to falsification of this benchmark interest rate. She wants to accept the fine.
Even if this does not lead to the manipulation of Euribor, the lack of control when setting the reference rate is very embarrassing for Deutsche Bank: the institute has been heavily involved in manipulating important reference rates as Libor and Euribor were discovered in 2011. For this, fines have already been paid Totaling $4 billion to authorities in the US, UK and EU.
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Defects from April 2019 to April 2020
Perhaps this was the most expensive and serious scandal for the institute, as a result of which many senior managers had to leave the institute. A former star dealer of the institute was sentenced to prison in London in 2018.
A time when deficiencies in supervision were also inconvenient for Deutsche Bank: the relevant EU regulations, which the bank violated, did not come into effect until the beginning of 2018. People familiar with the matter told Handelsblatt, the deficiencies punished by Bafin Now it happened between April 2019 and April 2020. The bank and Bafin did not want to comment on this.
However, the bank emphasized that it had “coordinated and already implemented the first measures to improve its controls with the responsible supervisory authority”. For the institute, it remains of “highest priority to identify and address potential weaknesses in its oversight processes”.
In the event of a violation of Euribor’s regulation, Bafin can impose penalties of up to ten percent of the turnover. At worst, this would have meant a fine of about two billion euros to Deutsche Bank. For this, the institute received 8.66 million euros.
In April, Bafin complained about the prevention of money laundering
In the past, Deutsche Bank had to pay heavy fines for shortcomings in its control systems, for example in the area of money laundering prevention. In early 2017, for example, British and US supervisory authorities fined the institute $630 million for laundering billions of euros through Russian agents.
It wasn’t until April when Baffin complained about what he saw as slow progress in improving money laundering prevention. So it added and extended the mandate of the money laundering watchdog it appointed at Dar Al Mal in 2018. The bank changed the money laundering officer shortly thereafter.
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