Deutsche Bank. Photo: Michael A. Scarcella/ ALMNew York State’s Department of Financial Services said Tuesday that Deutsche Bank will pay a $150 million penalty due in part to their relationship with Jeffrey Epstein.
The agreement is the first enforcement action from a regulator against a financial institution over dealings with the dead financier, according to the department.
The news comes just days after Epstein’s longtime friend and close confidante Ghislaine Maxwell was charged in federal court with helping the man run an underage sex trafficking ring.
In an unsealed indictment, prosecutors accused Maxwell of befriending girls to engage in illegal sex acts with Epstein.
Despite public information on Epstein’s earlier criminal behavior, the bank did not properly monitor account activity and processed millions of dollars in transactions, the regulator reported. The department said the transactions should have spurred more scrutiny given the history of Epstein, who was a registered sex offender.
Those transactions included hotel expenses, money to Russian models and more than $7 million in settlement payments, according to the state regulator. The transactions also include payments to people who were publicly accused of having been Epstein’s co-conspirators and more than $6 million in payments to law firms over what appears to be the legal expenses of Epstein and his co-conspirators, the department said.
Superintendent of Financial Services Linda Lacewell issued a statement saying the bank failed to prevent or detect millions of dollars in suspicious transactions.
“Banks are the first line of defense with respect to preventing the facilitation of crime through the financial system, and it is fundamental that banks tailor the monitoring of their customers’ activity based upon the types of risk that are posed by a particular customer,” she said in a statement.
Beside their relationship with Epstein, Deutsche Bank also agreed to the $150 million fine over compliance failures tied to banking relationships with Danske Bank Estonia and FBME Bank, the department reported.
Deutsche Bank issued a statement saying the settlement reflects their “unreserved and transparent cooperation with our regulator.”
“We have invested almost $1 bn in improving our training, controls and operational processes,” the statement added.
According to the consent order, Epstein’s personal attorney withdrew more than $800,000 in cash from the financier’s personal accounts in a period of roughly four years. The document said the attorney withdrew the money on behalf of Epstein.
“There is no indication that the Bank ever sought or received any explanation for Epstein’s cash activity beyond the travel, tipping, and expenses explanation provided by [the attorney],” according to the consent order.
The department reported that Deutsche Bank’s relationship with Epstein came through a bank relationship manager. The person had been at a Deutsche Bank competitor and while there had been part of a team servicing Epstein’s accounts.
Soon after joining Deutsche Bank, the relationship manager suggested to senior management that the financier was a possible client and someone who could bring in millions of dollars in revenue, according to the consent order.
Deutsche Bank did classify Epstein as a high risk, but they did not “scrutinize the activity in the accounts for the kinds of activity that were obviously implicated by Mr. Epstein’s past,” the document said.
The bank “did little or nothing to inquire into or block numerous payments to named co-conspirators, and to or on behalf of numerous young women, or to inquire how Mr. Epstein was using, on average, more than $200,000 per year in cash,” according to the consent order.
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