Deutsche (DB) warned by Fed to improve compliance procedures

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Deutsche Bank AG DB has been privately berated by the Federal Reserve for improving its anti-money laundering controls and other compliance procedures because the bank has consistently failed to heed multiple pacts with US regulators. The news was reported by Bloomberg.

The advice came in an annual regulatory assessment indicating that Deutsche Bank had not improved its risk management practices despite confidential agreements with the central bank to work on these issues. German bank executives could face sanctions, including the prospect of a huge fine, according to a person briefed on the matter.

In the past, Deutsche Bank has had several clashes with US regulators, such as currency violations and money laundering cases. The German giant has also reported to the Fed on its risk management practices. He has previously been fined $ 41 million for suspicion of money laundering.

In February 2021, Deutsche Bank, along with three other foreign lenders, were penalized by Taiwan’s central bank in a money speculation case. Taiwan’s central bank issued a statement banning Deutsche Bank’s Taipei branch from trading in both deliverable and undeliverable futures contracts in Taiwan dollars. He further suspended the bank for two years from trading in FX derivatives.

Additionally, in January, Malaysian companies 1Malaysia Development Bhd. and SRC International SdnBhd have filed lawsuits against Deutsche Bank and JPMorgan to recover assets worth more than $ 23 billion. The lawsuit is linked to a scandal involving embezzlement worth $ 4.5 billion, from 1MDB by senior fund officials and their colleagues from 2009 to 2014.

Our opinion

While Deutsche Bank’s cost containment efforts and strategic initiatives are likely to support finances in the quarters to come, litigation issues due to the bank’s past malpractice are a major concern. These could lead to higher legal costs in the future, thus hurting its bottom line.

Over the past six months, the company’s shares have gained 30.3%, surpassing the 22.2% growth recorded by the industry to which it belongs.

Image source: Zacks Investment Research

Currently, Deutsche Bank carries a Zacks Rank # 3 (Hold). You can see The full list of current Zacks # 1 Rank (Strong Buy) stocks here.

Several banks continue to be the subject of criminal investigations and are charged with huge sums of money for malpractice. This can, Bank of America LAC agreed to pay a fine of $ 75 million in order to settle an investigation into the excessive fees.

Last December, Mr. Cooper Group Inc. COOP was fined $ 28.6 million to settle legal inquiries with the Consumer Financial Protection Bureau regarding certain inappropriate loan service practices committed between 2010 and 2015.

In November 2020, the major of Wall Street JP Morgan JPM was fined $ 250 million for poor risk management and internal controls over fiduciary activity.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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