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Deutsche Bank Handled $150 Billion of Potentially Suspicious Flows Tied To Danske (#GotBitcoin?)

Preliminary findings of an internal review by Deutsche Bank AG of its role in a massive money-laundering scandal at Danske Bank suggest the German lender handled about $150 billion of the total amount of potentially suspicious transactions tied to Danske, according to a person familiar with the matter.

German lender’s shares drop on investor concerns about the scandal’s impact on its profitability.

Deutsche Bank’s findings aren’t final and haven’t been made public. It has been trying to assess its exposure to allegations of money laundering involving flows from Russia and elsewhere through Denmark’s largest bank. U.S. law enforcement agencies are probing transactions at Danske’s tiny Estonian branch over several years through 2015 where $230 billion flowed through accounts of non-Estonian account holders at the branch.

On Monday, a British former trader at Danske’s Estonian branch, Howard Wilkinson, testified publicly at a Danish parliamentary hearing about the scope of the alleged activity he witnessed at the small outpost.

Investor concerns about the impact of the Danske scandal have contributed to a drop in Deutsche Bank shares which are down more than 48% this year and hit new lows of near €8 ($9) Tuesday.

The shares had partially recovered by midday Tuesday in Germany, trading near €8.30, representing a 3% decline for the day. The Stoxx Europe 600 Banks index was down 1.8%.

The Danske concerns come as Deutsche Bank’s shares have fallen on broader doubts about its profitability.

“Deutsche Bank acted as correspondent bank for Danske Bank in Estonia,” a Deutsche Bank spokesman said. “Our role was to process payments for Danske Bank. We terminated this relationship in 2015 after identifying suspicious activity by its clients.”

Deutsche Bank has received requests for information from U.S. officials about Danske-related transactions, according to people familiar with the matter.

Mr. Wilkinson, who worked at Danske’s Estonian branch until 2014, pointed fingers at the three U.S. correspondent banks that cleared U.S. dollars for Danske Estonia for not catching suspicious flows of money. He singled out Deutsche Bank, referring to it only as the U.S. subsidiary of a European bank that served Danske throughout the period under investigation, between 2007 and 2015.

“This was the major correspondent bank for U.S. dollars, so when we are talking about this $230 billion number of suspicious funds, I would guess that $150 billion went through this particular bank in the U.S.,” he said.

His estimate roughly matches Deutsche Bank’s own preliminary findings, according to the person familiar with that review.

Correspondent banks serve as intermediaries in international transactions, handling transfers for other banks doing business in countries where they have limited operations.

Deutsche Bank handles $450 billion to $500 billion in U.S. dollar transactions, on average, each day, according to a person close to the business.

JPMorgan Chase & Co. served as correspondent bank for Danske Estonia until 2013, when it was replaced by Bank of America Corp. , which cut ties with the Estonia branch over money laundering concerns in 2015. Those banks have declined to comment.

In September, Danske Bank said in reporting findings from a law firm it hired that around $230 billion washed through its Estonian branch via thousands of accounts. A large part was deemed suspicious. The bank’s CEO resigned with the release of the report.

Deutsche Bank is a major correspondent bank for U.S. dollar transactions. Banks are responsible for policing such money flows and flagging transactions they deem suspicious. Suspicions can be based on origin of funds or concerns about who’s sending or receiving money.

Deutsche Bank has come under fire repeatedly from U.S. and European watchdogs for weaknesses in its policing of financial crime. The unit responsible for money-laundering has suffered high-level turnover. In recent months, its global and U.S. heads of financial crime-fighting have both left for jobs at other banks. The global head, Philippe Vollot, joined Danske Bank as chief compliance officer and an executive board member.

Deutsche Bank Offices Raided in Money-Laundering Probe

Investigation focuses on employees suspected of helping clients create offshore entities in tax havens.

German authorities raided Deutsche Bank AG DB -4.85% offices Thursday as part of an investigation into whether the firm helped clients launder money through tax havens. One of the employees suspected of involvement works in the division responsible for fighting financial crime, according to people familiar with the matter.

Around 170 police officers and other officials seized documents during searches through six different properties Thursday, including one employee’s home, according to authorities.

The raid was a visible sign of mounting legal problems for the German lender, which has faced a string of allegations and costly legal settlements tied to failures to prevent money laundering and other banking violations.

Thursday morning, police vehicles lined up outside Deutsche Bank’s central Frankfurt headquarters, and German federal police and other officers crowded into the lobby of the highrise towers. Officers soon filtered upstairs onto other floors of the bank to search records, a person inside the bank said.

Not long after, Randal Quarles, the Fed’s vice chairman for supervision, arrived for a prescheduled lunchtime meeting with Deutsche Bank’s chief executive Christian Sewing and regulatory chief Sylvie Matherat, people familiar with the matter said.

The meeting was arranged well before Thursday, the people said. A Fed spokesman had no immediate comment. Mr. Sewing became CEO in April and before Thursday had spoken with Mr. Quarles by telephone, people close to the bank say.

Ms. Matherat oversees the division responsible for detecting and preventing financial crime by clients of the bank. She has come under pressure amid discussions of a potential management shakeup, The Wall Street Journal reported this week, citing people close to the bank.

The German authorities are expected to return to Deutsche Bank Friday, according to people close to the bank. Areas they searched Thursday included management-board offices, one of the people said.

The probe includes two unidentified Deutsche Bank employees aged 50 and 46 and other unidentified employees suspected of helping clients create offshore entities in tax havens, the prosecutor’s office said in a statement. The person who works in the financial crime-fighting division remained an employee Thursday, the people familiar with the matter said.

Deutsche Bank confirmed the investigation. Both the bank and prosecutors said it is related to the Panama Papers, a trove of records revealed by a consortium of journalists in 2016 tied to a Panamanian law firm that specialized in offshore holding companies.

“As far as we are concerned, we have already provided the authorities with all the relevant information regarding Panama Papers,” Deutsche Bank said. It said that the bank would cooperate closely in this latest probe “as it is in our interest as well to clarify the facts.”

The investigation focuses on transactions spanning 2013 to 2018, prosecutors said.

People close to the bank said its lawyers and executives aren’t certain of the full scope of the investigation, including whether it is solely focused on the Panama Papers case, or could extend more broadly.

Reports stemming from the Panama Papers linked government and other public figures and company executives around the world to overseas assets in tax havens ranging from the British Virgin Islands to Panama. The records showed hundreds of millions of dollars in assets allegedly tied to hundreds of individuals.

Officials suspect that funds from criminal activities were transferred to Deutsche Bank entities or accounts without the bank raising flags as required, the prosecutor’s office said. The German prosecutors said Friday they were working based on information from Panama Papers documents and investigations.

Danske Bank Warns of Potential Resumption of French Money-Laundering Probe

Bank is under investigation in a number of countries for money laundering through its Estonian branch.

Danske Bank A/S said Friday a French judge expects to put the lender back under investigation for alleged money laundering.

Danske Bank already is under investigation in Denmark, Estonia, the U.K. and the U.S. for allegedly facilitating the laundering of about $230 billion through its Estonian branch by non-Estonian customers between 2007 and 2015. The scandal has led to the departure of several top bank executives.

The bank, Denmark’s largest, said Friday it had been charged in October 2017 with violating France’s anti-money-laundering laws, but in January 2018 its status was downgraded to that of an assisted witness.

In the statement, the bank said it received a letter this month from a French investigating judge summoning Danske back for an interview. The judge expects to place the bank back under formal investigation, with the French probe expanding in scope, the bank said, citing the letter.

A spokeswoman for the French national public prosecutor’s office didn’t respond to requests for comment.

The potential resumption of charges against Danske comes a day after Hermitage Capital Management co-founder Bill Browder held a press conference at the Danish parliament concerning allegations he brought to France against the bank.

Hermitage had filed a criminal complaint in France in 2013 concerning illicit money flowing into the country that stemmed from a tax theft in Russia. Some of the money from the tax theft, according to Hermitage, had flown to France through Danske Bank’s Estonia branch.

A Hermitage lawyer, Sergei Magnitsky, had exposed the theft but was arrested on charges he’d carried it out and later died in Russian custody. Mr. Browder has spent the years since chasing down the funds, which were spread across the globe, and seeking the prosecution of those who laundered the money.

Mr. Browder submitted a request in late December for Danske Bank to be elevated back to a suspect in the case, he said in an interview Friday. He accused the bank of making misstatements about its awareness of money-laundering activity when testifying before the French magistrate in October 2017.

A Danske spokesman said the bank doesn’t believe it misled the French authorities. “On the contrary, it is clearly in our interest to obtain as accurate a picture of what happened in Estonia as possible,” the spokesman said, declining to comment further about its discussions with French authorities.

The news about the French probe comes days after a U.S. pension fund, Plumbers & Steamfitters Local 773 Pension Fund, announced a class-action lawsuit against Danske Bank, alleging the bank had defrauded investors by inflating its share price when failing to disclose the money-laundering problems in Estonia.

The Danske spokesman said the bank is aware of the lawsuit filed by the pension fund and that several law firms have indicated similar suits are coming. “We will consider the lawsuit and the further process in consultation with our legal counsel,” he said.

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