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Deutsche Bank Fined EUR15M for Money-Laundering Scandal

Zacks Equity Research

Per a Reuters Article, Deutsche Bank AG DB has been slapped with a fine by the Frankfurt prosecutors related to the investigation of German client interactions with offshore entities established by the German bank's Virgin Islands subsidiary — Regula Ltd. Further, prosecutors have called off the probe of two bank employees suspected for engaging in tax evasion.

Notably, the bank had sold the subsidiary in March 2018. Previously, last year, Deutsche Bank's Frankfurt headquarters were raided by 170 police officers for two days. Further, this July, the investigation was supposed to be stretched by the prosecutors, with planned raids on wealthy former clients following the search of houses of eight people in May.

By this time, the prosecutors had called off investigating the money-laundering case due to lack of suspicion. Deutsche Bank has to pay 15 million euros ($16.5 million) as fines and forfeits due to lack of control in its compliance system.

Per the prosecutor's office, the fines imposed reflect the bank’s failure of timely reporting of alleged money-laundering issues associated with Regula, lack of intricate supervision and staff shortage in Deutsche Bank’s anti-money-laundering team from 2015 through early 2018.

“With the closure of these proceedings it is clear that the prosecutors have not found any instances of criminal misconduct on the part of Deutsche Bank employees following the raid of our Frankfurt office in November 2018," Deutsche Bank spokesman Joerg Eigendorf said in a statement.

"The investigation that has now been closed due to lack of sufficient suspicion had a heavy impact on Deutsche Bank last year,” he added. “It is true that the bank had weaknesses in its control environment in the past. We identified these weaknesses and we have addressed them in a disciplined manner,” Eigendorf further noted.

On the contrary, the prosecutor's office will continue its investigation of Regula’s German clients suspected of engaging in tax-evasion activities.

For Deutsche Bank, this settlement is an addition to its growing list of litigation charges. Dismal earnings, a tough operating backdrop and top-level management changes are some of the other major matters that have been dampening the company’s financials.

Currently, Deutsche Bank carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the past year, shares of Deutsche Bank have depreciated 13.9% on the NYSE compared with industry’s growth of 3.7%.


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