Deutsche Bank may have been used by some of its Russian clients as a hub for money laundering to a greater extent than previously assumed, a source familiar with the matter said yesterday.
The lender has found a total of $10 billion suspicious trades, including $6 billion in so-called "mirror trades" that it identified earlier this year, the source said.
The "mirror trades" may have allowed Russian customers to move money from one country to another without alerting the authorities, potentially allowing them to breach the sanctions against Russia after its 2014 annexation of Crimea.
Deutsche Bank said it is investigating certain equity trades in Moscow and London, adding the total volume of the transactions under review is "significant". Deutsche has for now put less than €1 billion aside for the issue. "But the case has the potential of becoming as big as Libor," the source said.
The Russia trades are now among Deutsche's top remaining legal headaches alongside the misselling of US mortgages in the run-up to the financial crisis and the investigation into the Chinese "princeling" issue of hiring children of government officials as a way to attract business.
While Deutsche Bank is sharing its Russia findings with European watchdogs such as the ECB, the US Justice Department and New York State's Department of Financial Services (DFS) are involved because some US citizens were allegedly part of the transactions, and because many of the trades were done in dollars.
The investigations focus on socalled "mirror trades", which could allow the movement of funds from one country to another without passing through normal procedures for cross-border money transfers.
The bank is also being examined to see if it had compliance programs ready for Russian sanctions and provided accurate information to regulators. Russia's central bank recently handed Deutsche a small fine of $5,000 for procedural shortcomings, but said that the bank was a victim of an illegal scheme and had taken measures to improve its systems.
Deutsche Bank has already decided to close its investment banking activities in the country, resulting in a reduction of its headcount by around 200 jobs in Russia.
Bloomberg earlier reported that Deutsche Bank identified an additional $4 billion in suspicious trades. The mirror trades involved clients using Deutsche Bank to buy securities in roubles only to sell them shortly after in a foreign currency. The newly identified transactions followed the same pattern.
However, they involved a second bank for either the first or the second part of the trade and were therefore more difficult to identify.