"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," Superintendent Linda Lacewell said. "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."
Deutsche Bank classified Jeffrey Epstein as an honorary PEP, politically exposed person, and the high-risk classification resulted in enhanced transaction monitoring of Epstein's accounts. However, the Department of Financial Services said, "This scrutiny was not tailored to the specific risks that he posed."
According to the consent order, while Epstein held accounts at Deutsche Bank, he sent more than 120 wires totaling $2.65 million. Some of those went to alleged co-conspirators or "women with Eastern European surnames for the stated purpose of covering hotel expenses, tuition and rent."
Deutsche Bank became so concerned about its relationship with Epstein that an unnamed executive from the bank met with him at his Manhattan mansion. Yet, according to the consent order, the bank continued business as usual with Epstein, noting a "number of sizeable deals" the relationship generated.
The bank was also aware of an unusually large amount of cash withdrawals Epstein's attorney made on his behalf. Over a four-year period the attorney withdrew more than $800,000 cash. The individual withdrawals were large enough to raise a flag "but 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 ATTORNEY-1," the consent order said.
The Department of Financial Services explained the $150 million penalty this way:
"The bank's fundamental failure was that, although the bank properly classified Mr. Epstein as high-risk, the bank failed to scrutinize the activity in the accounts for the kinds of activity that were obviously implicated by Mr. Epstein's past. The bank was well aware not only that Mr. Epstein had pled guilty and served prison time for engaging in sex with a minor but also that there were public allegations that his conduct was facilitated by several named co-conspirators. Despite this knowledge, 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.
"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 Bank's failure to recognize this risk constitutes a major compliance failure."
New York Governor Andrew Cuomo commented in a statement, "No matter how rich, how big or how powerful an institution you are, predatory behavior of any type will not be tolerated in New York. 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.
"While Washington has routinely looked the other way when it comes to punishing financial institutions, New York and the Department of Financial Services will continue to take its role as a strong regulator seriously and will use every possible tool to protect New Yorkers from predatory behavior in all its forms."
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Deutsche Bank to pay $150M over relationship with Jeffrey Epstein - WABC-TV
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