Tuesday, January 26, 2021

Deutsche Bank agrees $100 million settlement to avoid bribery charge

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Deutsche Bank AG agreed to pay $100 million to settle criminal allegations, including that it bribed foreign officials and manipulated the market for precious-metals futures through a trading tactic known as spoofing.

The Frankfurt-based bank agreed to a deal in which it won’t be prosecuted as long as it doesn’t engage in the tactic again for more than three years, and wasn’t required to plead guilty to the charges. The case was brought by federal prosecutors in Brooklyn, New York, and Washington who last year secured a $920 million fine against JPMorgan Chase & Co., the largest sanction ever tied to spoofing.

The agreement with the Justice Department was confirmed at a 40-minute remote hearing in federal court in Brooklyn on Friday. The U.S. Securities and Exchange Commission is involved as well.

“While we cannot comment on the specifics of the resolutions, we take responsibility for these past actions, which took place between 2008 and 2017,” Deutsche Bank spokesperson Dan Hunter said in a statement. “Our thorough internal investigations, and full cooperation with the DOJ and SEC investigations of these matters, reflect our transparency and determination to put these matters firmly in the past.”

‘Remedial Actions’

The bank has taken “significant remedial actions,” Hunter said, investing more than 1 billion euros ($1.22 billion) in data, technology and controls, improving its training and boosting its global anti-financial-crime staff to more than 1,600.

Spoofers trick other investors into buying or selling by putting in their own buy or sell orders with no intention of filling them. That creates artificial demand that drives prices up or down. With computerized trading common, the long-frowned-on practice has become a threat to market legitimacy. Spoofing contributed to the flash crash of May 2010, when almost $1 trillion was temporarily wiped out in the U.S. stock market.

Traders argue that the crime is too hard to distinguish from legitimate order cancellations. Prosecutors have to prove that traders intended in advance to cancel their orders.

Two Deutsche Bank traders, Cedric Chanu and James Vorley, were convicted in September of manipulating prices for gold and silver contracts. They were charged with entering bogus bids for contracts, canceling them before the orders were filled and profiting off the price swings in between.

Rush on Deals

Big banks have been rushing to conclude legal deals before the change of U.S. administrations, partly out of concern that there may be stiffer fines under a Democratic president. Three top U.S.-based banks agreed to pay more than $4 billion in settlements announced just before the November election, on issues ranging from bribery to market manipulation.

Deutsche Bank’s legal troubles come on top of a long downward spiral of declining revenue, stubborn fixed expenses, lowered credit ratings and rising funding costs. It has paid more than $18 billion in fines for financial misconduct in the decade since the financial crisis. In July, it agreed to pay New York’s banking regulator $150 million for a string of compliance lapses including a half-decade of lax oversight of the financial dealings of convicted sex offender Jeffrey Epstein.

German authorities fined the bank 13.5 million euros in October over money-laundering violations related to work with Danske Bank A/S. Deutsche Bank failed on more than 600 occasions to file timely alerts about suspicious transactions, Frankfurt prosecutors said at the time.

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