US officials are investigating whether the crisis-hit Deutsche Bank violated foreign corruption or anti-money-laundering laws in its work for the Malaysian state fund 1MDB, according to reports.
It follows the bank’s plans to scrap its global equities unit, cut some fixed-income operations and slash 18,000 jobs globally in a $8.34bn (£6.64bn) restructuring programme.
Deutsche’s work for 1MDB included helping to raise $1.2bn in 2014 as concerns about the fund begun to circulate, the Wall Street Journal said on Wednesday, citing sources.
Much of the $6bn raised by the now-defunct sovereign fund during its years in operation has gone missing.
Prosecutors are looking into the role of Tan Boon-Kee, a colleague of a former Goldman Sachs executive, Tim Leissner, who worked with him on 1MDB-related business, the the WSJ said.
She left Goldman to become Asia-Pacific head of banking for financial institutions at Deutsche, where she had further 1MDB dealings, it added.
In a statement, Deutsche Bank said it had fully cooperated with all regulatory and law enforcement agencies that made inquiries.
“As stated in asset forfeiture complaints filed by the US department of justice, 1MDB made ‘material misrepresentations and omissions to Deutsche Bank officials’ in connection with 1MDB’s transactions with the bank,” the bank told Reuters. “This is consistent with the bank’s own findings in this matter.”
A justice department civil asset-forfeiture complaint repeatedly describes Deutsche Bank as being misled by 1MDB officers, the WSJ said.
What went wrong at Deutsche Bank?
It embarks on a period of global expansion, beginning with the acquisition of merchant bank Morgan Grenfell in the UK and other European markets such as Spain, where it buys Banco de Madrid. It consolidates its US operations into one, in an effort to take on the big beasts of Wall Street such as Goldman Sachs, and in 1999 it builds on its US foothold by snapping up New York-based Bankers Trust for $10bn.
Deutsche Bank floats on the New York Stock Exchange, cementing its position as one of the major players, not just on Wall Street but in global banking.
Deutsche Bank becomes a leader in mortgage-backed securities, bundling up homeowners’ debt into huge packages and selling them on to investors. The bank continues to sell toxic mortgage-based investments even as the market turns south and it begins betting against such products itself. The bank reports its first annual loss for five decades for the 2008 financial year, losing €3.9bn.
An internal investigation finds that the bank hired private detectives to spy on people it considered a threat – including a shareholder, a journalist and a member of the public. German prosecutors find no evidence of criminal wrongdoing or that senior executives were involved.
It is fined $2.5bn (£1.7bn) by US and UK regulators for rigging the Libor interest rate, ordered to fire seven employees and accused of being obstructive towards regulators. Joint chief executives Anshu Jain and Jürgen Fitschen resign in the wake of the Libor scandal. The bank is fined a further $258m in the US for doing business with US-sanctioned countries like Iran and Syria.
As regulators continue to sift through the wreckage of the banking crash, Deutsche takes a large slice of the blame. In September 2016, its shares slump on news that the institution faces a $14bn (£10.5bn) charge over mis-selling mortgage securities in the US. It eventually reaches a $7.2bn settlement with the US Department of Justice.
UK and US regulators fine Deutsche more than $630m (£506m) after finding that the lender failed to prevent $10bn of Russian money laundering via ‘mirror trades’, which had no economic purpose and served only to transfer money covertly.
New York financial regulators hand down a fresh fine, just $205m this time, for ‘lax oversight’ in the bank’s foreign exchange business when it was the world’s largest dealer in foreign currency.
Christian Sewing takes over as chief executive and after three consecutive years of heavy losses, he slashes 7,000 jobs from Deutsche’s bloated investment banking arm.
Deutsche enters merger talks with another troubled German lender, Commerzbank. The talks fall apart in April 2019, scuppering plans for a bank that would have been the eurozone’s second largest. Sewing announces 18,000 jobs cuts, 20% of its workforce, with the axe falling worldwide.
Tan left Deutsche last year after it discovered communications between her and Jho Low, the Malaysian financier that the US justice department has described as the central player in the 1MDB scandal, it added.
The insurance company FWD Group, Tan’s current employer, said she declined to comment when contacted by the WSJ.
The justice department and FWD did not immediately respond to a request for comment from Reuters.
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