Justice investigation into Russian laundering through Deutsche Bank gone quiet
Posted November 15, 2017 2:26 p.m. EST
WASHINGTON (CNN) — A Justice Department investigation into Deutsche Bank's role in a $10 billion Russian money laundering scheme has gone dormant months after the bank settled with regulators, according to people with direct knowledge of the investigation.
DOJ's money laundering division along with the US attorney's office for the Southern District of New York have been investigating the German lender over allegations it missed red flags that allowed Russians to launder billions of dollars out of Moscow using an elaborate trading scheme.
The bank has paid over $670 million in civil penalties to US and UK regulators this year relating to the Russian trades and disclosed in regulatory filings as recently as last month that it set aside an undisclosed amount to cover a potential settlement with DOJ. It is common for regulators and DOJ to move to settle cases at the same time, which companies often advocate for so they can put the matter behind them.
The DOJ investigation has been closely watched by Democrats on Capitol Hill who have tried and failed to get Deutsche Bank to turn over its internal investigation into the Russian trades and a separate internal review into whether bank accounts of President Donald Trump and his family have any ties to Russia. The Deutsche Bank civil settlement has no connection to bank accounts held by the President or Jared Kushner, Trump's son-in-law and White House senior adviser
Criminal investigations like the one facing Deutsche Bank can span months or years before resolutions are reached or DOJ determines there is not a case. Prosecutors have not made requests for information or witness testimony in several months leaving some people familiar with the investigation wondering about the status. There have also been no settlement talks between the sides despite the bank indicating it is prepared to pay a fine to settle the investigation. While the investigation appears to have slowed down, it could be revived at any time.
Representatives from the US attorney's office in Manhattan and DOJ declined to comment. A spokeswoman for the bank declined to comment.
Multiple investigations by congressional committees and special counsel Robert Mueller are looking broadly into Russia's possible interference with the US election including money transfers. It is not clear whether Mueller has taken an interest in the Russia trades.
It is not clear why the DOJ investigation appears to have slowed, but it comes as senior positions within DOJ have not been filled with permanent appointees and as top agency officials have signaled they are rethinking department policy toward corporate prosecutions.
Under the Obama administration, financial institutions paid hundreds of billions of dollars in fines in the decade since the 2008 financial crisis. The DOJ had reversed decades of tradition by requiring banks to plead guilty to criminal charges ranging from market manipulation to sanctions violations.
In September, Deputy Attorney General Rod Rosenstein said during a question-and-answer session after a speech at the Heritage Foundation that DOJ is reviewing its stance toward corporate prosecutions.
"Corporations of course don't go to prison. They do pay a fine. And so the issue is: Can you effectively deter corporate crime by prosecuting corporations or do you in some circumstances need to prosecute individuals? I think you do," according to a transcript posted on C-SPAN.
He added, "I do anticipate we may in the near future make an announcement about what changes we're going to make to the corporate fraud principles."
Democrats have focused on the bank since the election. "Deutsche Bank's pattern of involvement in money laundering schemes with primarily Russian participation, its unconventional relationship with the President, and its repeated violations of US banking laws, all raise serious questions about whether the Bank's reported reviews of the trading scheme and Trump's financial ties to Russia were completely thorough," according to a letter sent in May by California Rep. Maxine Waters, the top Democrat on the House Financial Services Committee, and four other Democrats.
Deutsche Bank has been a key lender to Trump businesses when other major banks have balked. Trump businesses have borrowed over $300 million for a Florida golf course and hotels in Chicago and Washington DC, according to financial disclosures and public filings from 2012 to 2015. Kushner disclosed an unsecured line of credit from the bank ranging between $5 million to $25 million that he shares jointly with his mother since 2015.
The White House did not comment. A spokesman for Kushner declined comment.
A March letter by the same Democrats asking Texas Rep. Jeb Hensarling, the Financial Services Committee's Republican chairman, to subpoena the bank said, "We are concerned about the integrity of this criminal probe and whether senior bank officials will be held accountable given the President's ongoing conflicts of interest with Deutsche Bank." In July, Waters used a procedural move to try to force Hensarling to subpoena the bank but the motion was voted down.
Deutsche Bank has declined to provide the Democrats information citing privacy laws. In a June letter, lawyers for the bank wrote, "We respectfully disagree with the suggestion that Deutsche Bank freely may reveal confidential financial information in response to requests from individual Members of Congress."
In September, when Deutsche Bank Chief Executive John Cryan was asked by CNBC whether the bank has heard from Mueller he said, "We think we said we wouldn't comment any further on that investigation."
Asked generally about US inquiries into possible Russian interference and loans extended to the Trump family, Cryan said, "I think we have agreed we wouldn't comment on that matter other than to say if we do receive a request potentially in the form of a subpoena, but there are other forms of formal request by which we're bound, then of course we will cooperate fully with any official investigation."
Deutsche Bank disclosed the Russian trading scheme in July 2015 when it said it was conducting an internal investigation into trades through the bank's Moscow desk that passed through New York and London. The bank said it brought the issue to the attention of regulators and law enforcement in the US, Germany, Russia and the UK.
In late January, Deutsche Bank paid $630 million to settle civil claims by New York's Department of Financial Services and the UK's Financial Conduct Authority over the alleged conduct that spanned from 2011 until early 2015. In May, it paid $41 million to the Federal Reserve.
The New York state regulators alleged in the consent order that they found "serious compliance deficiencies" that "spanned Deutsche Bank's global enterprise. These flaws allowed a corrupt group of bank traders and offshore entities to improperly and covertly transfer more than $10 billion out of Russia, by conscripting Deutsche Bank operations in Moscow, London and New York to their improper purpose." The regulator added, "Deutsche Bank has represented that it has been unable to identify the actual purpose behind this scheme. It is obvious, though, that the scheme could have facilitated capital flight, tax evasion, or other potentially illegal objectives."
The bank said in its October filing that it "continues to cooperate with regulators and law enforcement authorities, including the DOJ, which has its own ongoing investigation into these securities trades."
The investigation is one of the last remaining major liabilities hanging over the bank, which has moved under Cryan to resolve open investigations and shift the bank's focus toward growing its business.