FRANKFURT/NEW YORK, Oct 28 (Reuters) - U.S. and U.K authorities have made progress in their investigation into allegations that Deutsche Bank helped its clients in Russia disguise suspicious trades, and a settlement could come by the first half of next year, people familiar with the matter said.
The U.S. Department of Justice, New York’s Department of Financial Services and the UK’s Financial Conduct Authority each launched investigations into the so-called Russian “mirror trades,” which allegedly involved clients using Deutsche Bank to buy securities in rubles only to sell them shortly after in a foreign currency, Reuters previously reported.
The bank has been making presentations to both U.S. and UK government officials on its findings and discussions are expected to begin soon on settlement terms, such as the size of a potential penalty, one of the people said this week.
Deutsche Bank, the U.S. Justice Department, New York’s Department of Financial Services and the Financial Conduct Authority all declined to comment on the matter.
The probe into suspicious equities trading in Russia is yet another legal hurdle for Germany’s largest lender, which is also in talks with U.S. authorities to settle claims the bank misled investors in selling mortgage-backed securities in the run-up to the financial crisis.
The trades in question may have allowed Russian customers to illegally move money from one country to another, in violation of money laundering controls, people close to the matter have said.
People have said the probe was also looking into whether clients transferred money in breach of Western sanctions on Russia over the Ukraine conflict which went into effect in 2014.
But the focus of the probe is currently on alleged money laundering, rather than possible violations of the Western sanctions, two people familiar with the matter said this week.
Deutsche Bank said last year it was investigating certain equity trades in Moscow and London, adding the total volume of the transactions under review is “significant.” It also cut back on its investment banking activities in Russia last year.
Reuters reported that the bank had found a total of $10 billion of suspicious trades in Russia, including $6 billion in mirror trades, citing people familiar with the matter.
Germany’s financial watchdog found no evidence to date that Deutsche Bank violated money laundering rules in Russia in connection with the case, people close to the matter told Reuters earlier this month.
While Bafin, the financial supervisory authority for Germany, generally asks German lenders to improve internal procedures, it has no power to ask for hefty fines - unlike regulators in the U.S. and UK, who have made Deutsche pay out billions to resolve past missteps.
Deutsche Bank raised its provisions for all outstanding legal cases to 5.9 billion euros from 5.5 billion euros in the third quarter, without specifying for which cases. People close to the matter have told Reuters that 1 billion euros of that has been set aside for the Russian case. (Reporting by Kathrin Jones, Arno Schuetze and Alexander Hübner in Frankfurt and Karen Freifeld in New York, Editing by Soyoung Kim and Andrew Hay)