Deutsche Bank Cites Flaw in Payment Tracker -- WSJ
23 May 2019 - 8:02AM
Dow Jones News
By Jenny Strasburg
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (May 23, 2019).
FRANKFURT -- Deutsche Bank AG has found a glitch in computer
systems that retroactively scan corporate clients' transactions for
suspicious activity, the latest sign of trouble in the lender's
efforts to guard against potential money laundering by clients.
The glitch, which might have been in place for close to a
decade, hampered a program that scans payments involving corporate
clients after they pass through the bank so it can flag suspicious
patterns to regulators, a person familiar with the matter said.
Regulators rely on such information, gathered from a range of
financial companies, to prevent money laundering and terrorism
funding through the global banking system.
The Deutsche Bank program in question "was configured
erroneously with two out of 121 parameters defined incorrectly,"
the bank said. "Deutsche Bank is working on correcting the error as
quickly as possible and is in close contact with the
regulators."
The problem was discovered by employees in Europe and reported
to regulators recently, and the bank is still investigating the
problem, the person said. It is unclear what companies, countries
or types of cash flows were affected by the transaction-review
issues. Deutsche Bank found the problem during its latest revamp of
money-laundering systems, which it started late last year.
The issue was first reported Wednesday by German newspaper
Süddeutsche Zeitung, a day before Deutsche Bank's annual
shareholder meeting in Frankfurt.
The bank's chairman and chief regulatory officer -- among other
executives -- are braced for intense criticism for its share-price
declines, meager profits and a seemingly endless series of
compliance mishaps and regulatory investigations.
The lender's lagging performance and years of executive turnover
have caused turmoil in its compliance ranks and constrained its
ability to fix computer systems, many of them described by
executives as outdated.
Parameters in financial-crime monitoring systems can be set to
alert banks based on details like a company's compliance history,
relationships to government officials and unusual transaction
volumes. The Deutsche Bank system in question is separate from
programs that monitor cash flows in real time, and can delay or
block transactions if they are flagged as potentially
problematic.
Banking watchdogs in the U.S. and Europe have fined Deutsche
Bank for a range of compliance failures. Ongoing investigations are
focused on alleged risky transactions involving Russia and other
countries.
Additional scrutiny of the bank's compliance practices has
intensified from U.S. investigators and congressional Democrats.
Two congressional committees are probing the bank's
money-laundering controls broadly, along with its ties to President
Trump, his campaign and people and entities connected to him. The
president's lawyers have sought to block subpoenas issued to
Deutsche Bank as part of the probes into him and his family, citing
privacy and legal jurisdiction. Mr. Trump has said the
Democratic-led investigations aren't impartial.
Write to Jenny Strasburg at jenny.strasburg@wsj.com
(END) Dow Jones Newswires
May 23, 2019 02:47 ET (06:47 GMT)
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