FRANKFURT/TALLINN (Reuters) – Deutsche Bank did not disclose more than one million suspect money transfers with Danske Bank until February, a person with direct knowledge of the matter said, about five years after a whistleblower flagged suspicious transactions at Danske.
Deutsche sent alerts about the suspect money flows involving the Danish bank to Germany’s money laundering data authority and state prosecutors, the person said, prompting investigators to seek more information from Deutsche.
Prosecutors are now investigating whether staff or management at Deutsche sanctioned the transactions, and whether they subsequently tried to cover them up, the person said, speaking on condition of anonymity.
Deutsche did not comment on the time taken to flag the transactions to authorities, which has previously not been reported, but said it ended its relationship with Danske in 2015 and had strengthened its anti-money laundering controls.
Danske Bank was ejected from Estonia this year after admitting 200 billion euros ($220 billion) of suspicious money flowed through its branch there between 2007 and 2015.
Deutsche was dragged into the scandal because it processed the bulk of the transactions for the Danish bank, leading German prosecutors to visit Deutsche’s headquarters last month with police and a search warrant.
Asked about the case, Deutsche said in an emailed statement that it “remains committed to providing appropriate information to all authorized investigations.”
“We have considerably increased staff numbers in Anti-Financial Crime and more than tripled our staff since 2015. We invested since 2016 700 million euros in upgrading our key control functions there.”
Following the information from Deutsche, German prosecutors visited their counterparts in Estonia in recent weeks to investigate the suspect money flows further, the person said.
Prosecutors are now investigating a small fraction of the 1.1 million transfers flagged by Deutsche, involving Russia and former Soviet states in 2014 and 2015, the person added.
If investigators find that Deutsche staff or management sanctioned and covered up its involvement in the suspicious transactions, those bankers or the group itself could face criminal prosecution, the person said.
That would deal another blow to Deutsche’s reputation and a setback to Chief Executive Christian Sewing’s drive to turn around Germany’s biggest lender.
Once Germany’s flagship bank on Wall Street, Deutsche has been shrinking to try to return to sustainable profitability and has been hit by a string of penalties, including a $7.2 billion fine in 2017 for selling toxic U.S. mortgages before the financial crash.
Now, it faces a series of investigations, including one over sham trades to move hundreds of billions of roubles out of Russia, as it struggles to regain the trust of investors, staff and politicians in Germany.
Deutsche is one of a number of large international banks to become embroiled in a money laundering scandal in the Baltics, former Soviet satellite states on the edge of Europe that often acted as a staging post for money leaving Russia for the west.
A spokesman for Deutsche said it ended the relationship with Danske in 2015 after identifying “an increase in suspicious transactions from Danske clients over an extended period of time.”
But it is unclear why Deutsche did not report the suspicious fund transfers until earlier this year.
Germany’s Financial Intelligence Unit, which gathers the so-called suspicious activity reports, declined to comment.
A person familiar with the matter said the time taken to report the transactions was unlikely to lead to a penalty from German financial regulator BaFin because Deutsche’s role as a so-called correspondent bank was secondary to Danske.