For Deutsche Bank, the nightmare week just got a tiny bit worse after revelation of links with Epstein and a US investigation into the bank’s participation in 1MDB controversy
US Department of Justice (DoJ) is a looking into Deutsche Bank as part of a larger investigation regarding the 1MDB affair, as reported by the Wall Street Journal.
German bank’s staff dealing with compliance issues raised concerns over involvement with Epstein’s enterprise, but the upper management overruled their objections, reports the New York Times.
As the reports keep piling up, the bank’s woes keep stacking up. Deutsche Bank’s share price keeps tanking, forcing it to restructure and start a bout of merciless job cuts.
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For Deutsche Bank, the bad keeps getting worse.
US government agencies are looking into if the German bank violated AML (anti-money laundering) or foreign corruption laws by cooperating with Malaysia 1MDB, reports the Wall Street Journal.
The news surfaced once The New York Times published information on how the Deutsche Bank compliance staff’s concerns over dealings with Jeffrey Epstein, who is being charged with sex trafficking of minors, were overruled by the upper management.
People calling the shots at the Deutsche Bank must have been pulling their hair out this week, as the bank’s shares dropped by 1% when trading resumed today.
Despite launching a merciless bout of fat-trimming that is set to downsize the bank by some 18,000 jobs at the start of the week, Deutsche Bank has been criticized for doling out golden parachutes to senior executives, and traders lambasted the management for not thinking far enough ahead with its restructuring, leading to share price drop.
Germany’s biggest creditor has had more headaches: a couple scandals past year that led to its offices being raided, the Danske Bank money laundering controversy and now $2bn in loans to companies owned by Donald Trump.
DoJ investigators, who had previously analyzed lucrative deals Goldman Sachs made with 1MDB, a Malaysian fund, are now digging deeper as they’ve discovered that one GS executive went to work for the Deutsche Bank, wrote WSJ Thursday.
The executive remains anonymous for now, and the US authorities haven’t accused them or the Deutsche Bank of foul play.
As reported by The Times, compliance staff at Deutsche Bank were the first to note Epstein’s poor reputation, stating that he was a major risk to the bank.
Upper management dismissed their concerns, said The Times, and noted there was no foul play when it came to the transactions in question, making Epstein just another lucrative client. Earlier in 2019, Deutsche Bank severed its connections with Epstein.
Business Insider was unable to get any comments from Deutsche Bank regarding the Epstein affair.
But, the bank did comment on the 1MDB affair, stating: “Deutsche Bank has cooperated fully with all regulatory and law enforcement agencies that have made inquiries relating to 1MDB."
The crux of the problem with 1MDB is that Deutsche Bank helped it raise $1.2bn in 2014, which raised concerns at DoJ that foreign corruption or AML laws were being broken, according to a WSJ report.
Tim Leissner is another piece of the puzzle, being an ex-Goldman employee who admitted to siphoning off billions from the 1MDB fund but has now become a part of the investigation, helping US authorities discover more sordid details.
Allegedly, 1MDB was created as Malaysian government plan to fund infrastructure investments but quickly turned into a scam worth over $3bn.
This scandal brought down Malaysian Prime Minister at the time, counting as one of the largest monetary scandals in Malaysian history. Suspected mastermind, Jho Low, has not yet been captured, and Goldman Sachs came under a storm of criticism for dealing with the fund.
Even Miranda Kerr and Leonardo DiCaprio were linked to the scandal, among others.
The fund raised $6bn in 2012-3 using Goldman Sachs, netting the bank $600mm in fees, Bloomberg reports.
Epstein says he’s not guilty for new charges filed against him this week. Goldman Sachs has refuted any wrongdoing when it comes to 1MDB, claiming to be involved with official investigation of the fund.
