Deutsche Bank has agreed to pay $150 million to settle a New York state regulator investigation into "significant" compliance failures in its relationship with convicted sex offender Jeffrey Epstein, as well as with two other banks.
The German lender took on Epstein as a client in 2013 but failed to properly monitor account activity conducted on his behalf "despite ample information that was publicly available" concerning his earlier criminal misconduct, says the New York State Department of Financial Services.
Deutsche Bank processed hundreds of transactions worth millions of dollars that "at the very least, should have prompted additional scrutiny" in light of the history of Epstein who was last year arrested on federal charges of sex trafficking underage girls. He died in jail in what was ruled a suicide.
The transactions included payments to people who were publicly alleged to have been Epstein's co-conspirators in sexually abusing young women, says the NYDFS, with settlement payments totaling over $7 million as well as payments to law firms totaling over $6 million "for what appear to have been the legal expenses" of Epstein and his co-conspirators.
Meanwhile, there were payments to Russian models, payments for women’s school tuition, hotel and rent expenses, and "directly to numerous women with Eastern European surnames" as well as "suspicious" cash withdrawals totaling more than $800,000 in a four-year period.
The NYDFS says that a bank reputational risk committee did impose conditions on the Epstein accounts but that these were not sent to account relationship staffers and were misinterpreted by a compliance officer.
The regulator has also taken Deutsche to task over its correspondent relationships with Danske Estonia and FBME Bank, accusing it of failing to act on "red flags".
Superintendent Linda Lacewell says: "In each of the cases that are being resolved today, Deutsche Bank failed to adequately monitor the activity of customers that the Bank itself deemed to be high risk. In the case of Jeffrey Epstein in particular, despite knowing Mr Epstein’s terrible criminal history, the Bank inexcusably failed to detect or prevent millions of dollars of suspicious transactions.”