Financial regulators in New York have fined Germany’s largest bank, Deutsche Bank, $150 million for its “significant compliance failures” with respect to its relationship with convicted child sex offender Jeffrey Epstein.
The fine marks the first time that a regulator has punished a financial institution for its relationship with Epstein.
Epstein was a client of Deutsche Bank from August 2013 to December 2018.
The bank had processed hundreds of transactions for Epstein, the late financier who was found dead in a New York prison cell last August while awaiting trial on child sex trafficking charges. His death has officially been determined to be a suicide.
New York’s Department of Financial Services, or DFS, said Deutsche Bank helped Epstein transfer millions of dollars, including more than $7 million in legal fees and more than $2.6 million paid to various women to cover their tuition, rent, among other expenses.
Such transactions included payments to Russian models and some $800,000 in suspicious cash withdrawals.
Some of these payments were made to alleged accomplices “who were publicly alleged to have been Epstein’s co-conspirators in sexually abusing young women,” the regulator said.
“Whether or to what extent those payments or that cash was used by Mr. Epstein to cover up old crimes, to facilitate new ones, or for some other purpose are questions that must be left to the criminal authorities, but the fact that they were suspicious should have been obvious to bank personnel at various levels,” the regulator said. “The bank’s failure to recognize this risk constitutes a major compliance failure.”
The regulator pointed out that Deutsche Bank considered Epstein “high-risk” and was aware of his history of sex trafficking and abuse, including a guilty plea in 2007 to state prostitution charges. Yet they still took on Epstein – who was believed to be a billionaire – as a client.
The $150 million penalty also covers Deutsche Bank’s failures to prevent money laundering at Danske Bank Estonia and at the Cyprus-based bank FBME.
“Banks are the first line of defense with respect to preventing the facilitation of crime through the financial system,” said Linda Lacewell, the superintendent of DFS. “In each of the cases that are being resolved today, Deutsche Bank failed to adequately monitor the activity of customers that the bank itself deemed to be high risk. In the case of Jeffrey Epstein in particular, despite knowing Mr. Epstein’s terrible criminal history, the bank inexcusably failed to detect or prevent millions of dollars of suspicious transactions.”
New York Governor Andrew Cuomo stated: “For years, Mr. Epstein’s criminal, abusive behavior was widely known, yet big institutions continued to excuse that history and lend their credibility or services for financial gain.”
The bank admitted its failures.
“We acknowledge our error of onboarding Epstein in 2013 and the weaknesses in our processes, and have learnt from our mistakes and shortcomings,” Deutsche Bank said in a statement. “Our reputation is our most valuable asset and we deeply regret our association with Epstein.”
The bank also said it has spent nearly $1 billion to improve its compliance practices and expand its anti-financial crime segment to comprise more than 1,500 people.
“Immediately following Epstein’s arrest, we contacted law enforcement and offered our full assistance with their investigation,” said a spokesman for Deutsche Bank. “We have been fully transparent and have addressed these matters with our regulator, adjusted our risk tolerance and systematically tackled the issues.”
Deutsche Bank Chief Executive Officer Christian Sewing said in an internal memo that accepting Epstein as a client was a “critical mistake.”
“We all have to help ensure that this kind of thing does not happen again,” he said.
Deutsche Bank has faced other penalties related to failed compliance – including activities by Russian money-launderers. The bank has also faced questions over its relationship with U.S. President Donald Trump.
Epstein had high profile connections with many prominent global figures, including Donald Trump, Bill Clinton and Prince Andrew of the British Royal Family.
Last week, Ghislaine Maxwell, Epstein’s former girlfriend, was arrested in New Hampshire on charges of aiding and participating in Epstein’s abuse of underage girls.
Maxwell, a British socialite, is the daughter of media tycoon Robert Maxwell.
She is scheduled to face a court hearing in New York next week.
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