Deutsche Bank Agrees To $150 Million Fine For Jeffrey Epstein Dealings. Mistakes Were Made!

Legal

Money laundering isn't inherently comical. Jeffrey Epstein, may he rot in hell, isn't funny at all. And yet, the consent order laying out exactly why Deutsche Bank just agreed to pay a $150 million fine to the New York State Department of Financial Services is HILARIOUS.

No, wait, come back! For reals, this shit is nuts.

It all started in 2013 when JP Morgan told Epstein to take his multiple hundreds of millions of dollars and hit the road, Jeff. He'd pled guilty in 2008 to sex crimes involving an underage girl in Florida, and in 2009 details of his settlements with dozens of accusers appeared in the press, but it only took five years for JP Morgan to decide that the financier represented a reputational risk to the bank that agreed to hold his money. Which sounds bad, but then Deutsche Bank said HOLD MY BEER.

In 2013 Epstein's private money manager from JP Morgan joined DB and promised that if they took on her former client, he would bring $100 to $300 million in assets and net the firm between $2 and $4 million in fees every year. KA CHING!

Oh, sure, they thought about the risks. But, you know, not all that hard.

On May 5, 2013, EXECUTIVE-1 sent an email (hereinafter, the "Approval Email") to RELATIONSHIP MANAGER-1 which read "spoke with [the Head of AML Compliance for Deutsche Bank Americas and the then-General Counsel for Deutsche Bank Americas, who at that time served as chair of the Bank's Americas Reputational Risk Committee ("ARRC")]. Neither suggest [that the Epstein relationship] requires rep risk and we can move ahead so long as nothing further is identified through KYC [Know Your Customer] and AML [Anti-Money Laundering] client adoptions." The Bank has represented to the Department that it has no other record of this communication between EXECUTIVE-1 and the other officers, and the ARRC did not meet in connection with the initial onboarding of Mr. Epstein.

Because what even is due diligence?

By November 2013, Epstein was already using his DB accounts to send money to people who had been publicly named as co-conspirators in the Florida indictment and public reporting, and in January 2014 he opened a checking and money market account for a trust called "The Butterfly Trust."


The Butterfly Trust included a number of beneficiaries, including, among others, CO-CONSPIRATORS 1-3, and a number of women with Eastern European surnames. When Bank personnel asked Epstein and Epstein's representatives about his relationship with the beneficiaries, Epstein represented that they were employees or friends. The Bank's KYC records state that the purpose of the money market account was "to pay all expenses/disbursements related to the trust [such as] taxes, trust fee [SIC], etc."

Via the Butterfly Trust account and and other pots of cash DB was holding for him, Epstein sent upwards of 120 wires totaling $2.65 million "including some transfers to alleged co-conspirators or women with Eastern European surnames, for the stated purpose of covering hotel expenses, tuition, and rent."

Which did not go unnoticed by DB's crack compliance department. But don't worry, you guys, they asked Epstein if he was back to paying young women for sex, and he said NO WAY.

Later that month, on January 22, 2015, in preparation for the ARRC meeting, EXECUTIVE-1 and RELATIONSHIP MANAGER-1 met in person with Mr. Epstein at his New York home. During the meeting, EXECUTIVE-1 asked Mr. Epstein about the veracity of the recent allegations and appeared to be satisfied by Mr. Epstein's response.

Then they all resolved to keep a good eye on Epstein's transactions for "unusual and/or suspicious activity." But they "purportedly misinterpreted" that to mean moving money in a way that was "unusual, suspicious, or novel as compared to the prior history of transactions related to the Epstein relationship." And since he was always sending money to young women in Russia, that was just NBD.

The interpretation was exemplified by a later email exchange in March of 2017, when a member of the transaction monitoring team responded to an alert about payments to a Russian model and Russian publicity agent, stating, "[s]ince this type of activity is normal for this client it is not deemed suspicious."

Okay, so, yes, that looks bad. But in DB's defense, they agreed to Google the women Epstein wired cash to, just to ensure they were all old enough to vote.

Instead of monitoring the accounts for all potential crimes and suspicious activity that could be implicated by Mr. Epstein's alleged past conduct, including payments to coconspirators and those that could be related to sex trafficking involving adults, AML OFFICER2 only instructed the relevant transaction monitoring team to verify, using internet searches, that any woman involved with transactions related to the Epstein relationship was at least 18 years old and to only flag transactions if they could not discern a rational reason for the transaction, a standard which had little if any effect on the Bank's relationship with Mr. Epstein.

Why was Epstein sending all this money to Eastern European women care of a Russian bank? For tuition payments. Because he was such a generous man.

In a May 2018 email, a compliance officer submitted an inquiry to RELATIONSHIP MANAGER-2 about payments to the accounts of women with Eastern European surnames at a Russian bank, and asking for an explanation of the purpose of the wire transactions and Epstein's relationship with the counterparties. After submitting the questions to ACCOUNTANT-1, RELATIONSHIP MANAGER-2 forwarded ACCOUNTANT-1's response to the compliance officer, which read "SENT TO A FRIEND FOR TUITION FOR SCHOOL." When the compliance officer followed up, asking "[w]hy is this client using this account to . . . pay school tuition?," RELATIONSHIP MANAGER-2 replied "[g]enerally, Jeffrey has separate accounts to manage each of his properties. This is one of them. However, when making one-off transfers to people, he and his finance staff have the flexibility to use any account they like that is funded." The Bank has represented to the Department that it has no records of the compliance officer asking further follow-up questions, and the transaction was cleared.

ACCOUNTANT-1, call your lawyer!

Also, Jeffrey Epstein's lawyer, you call your lawyer, too! And then slap yourself upside the head.

In May 2014, ATTORNEY-1 inquired into how often he could withdraw cash on behalf of Mr. Epstein without triggering an alert. The record is unclear as to whether anyone from the Bank ever responded to ATTORNEY-1's inquiry. RELATIONSHIP COORDINATOR1 sent an email to the branch manager stating that ATTORNEY-1 "asked how often they could come in to withdraw cash without creating some sort of alert," and asking "Is it once a week? Twice a week? Once every other week?"

So Epstein's attorney asked the DB tellers how often he could make cash withdrawals without tipping off the feds, apparently worried that multiple withdrawals per week aggregating to more than $10,000 would trigger the anti-money laundering reporting requirement. But the bank asked him about it and he said, Oh, don't worry, Jeff just needs the cash for tips.

AML OFFICER-2, among others, spoke with ATTORNEY-1 and advised that (a) his patterns gave the appearance of structuring, (b) this pattern was unacceptable, and (c) he would be provided with additional information about CTR reporting requirements. ATTORNEY-1 represented that he had not intended to structure cash withdrawals. Bank personnel found ATTORNEY-1 credible and permitted him to continue to withdraw cash from his own and Epstein's accounts. In 2018, just prior to the Bank's closing of the Park Avenue Branch, which was located nearby Mr. Epstein's house, ATTORNEY-1 withdrew $100,000.00 in cash on behalf of Mr. Epstein. When later questioned why ATTORNEY-1 withdrew these sums from the Bank, ATTORNEY-1 reported that Mr. Epstein needed the funds for tipping and household expenses.

All together, Epstein's attorney took out $800,000 in cash over four years. Which is quite a lot of tips!

Now, DB isn't forking over $150 million just for its massive failure to comply with due diligence, "know your client," and anti-money laundering statutes with regard to Jeffrey Epstein. It's also getting dinged for its lack of compliance standards in its dealings with Danske Estonia, which New York prosecutors describe as being "at the center of one of the world's largest money laundering scandals," and the Federal Bank of the Middle East (FBME), which the Treasury finally barred from doing business with US banks for its persistent failure to adhere to anti-money laundering statutes.

But the Epstein stuff is not good. And we can't help but think of a couple of other high-risk borrowers who have longstanding relationships with Deutsche Bank. Namely Jared Kushner and his father-in-law, the Live Tweeter in Chief. Maybe it's a coincidence that Donald Trump is fighting tooth and nail to keep his financial records out of the hands of Congress and New York prosecutors. And maybe it's not.

Anyway, tomorrow is another decision day at the Supreme Court, and oh, by the by, the Trump tax and financial decisions have yet to be handed down. Just sayin' ...

[Consent Order]

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Liz Dye

Liz Dye lives in Baltimore with her wonderful husband and a houseful of teenagers. When she isn't being mad about a thing on the internet, she's hiding in plain sight in the carpool line. She's the one wearing yoga pants glaring at her phone.

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