Deutsche Bank to pay $258 million to settle U.S. sanctions case - NYDFS

By Suzanne Barlyn

(Reuters) - Deutsche Bank AG will pay a $258 million (£168 million) penalty to settle charges that it did business on behalf of entities in U.S.-sanctioned countries like Iran and Syria, the New York Department of Financial Services (NYDFS) and Federal Reserve said on Wednesday.

Germany's largest bank conducted $10.9 billion in clearing transactions for the customers from 1999 to 2006, using "non-transparent methods and practices" to shield them from scrutiny, the New York State regulator said.

The settlement requires Deutsche Bank to hire an independent monitor and fire six employees, while several others have already left. Deutsche Bank will pay $200 million of the penalty to NYDFS and the remaining $58 million to the Fed.

"The conduct ceased several years ago, and since then we have terminated all business with parties from the countries involved," a Deutsche Bank spokeswoman said in a statement.

At issue are rules that prohibit doing business in countries that the U.S. government has deemed havens for possible terrorist financing. The U.S. had also identified a number of Deutsche Bank customers as acting on behalf of those sanctioned countries, including Iran, Syria, Libya and Sudan, regulators said.

Deutsche Bank employees developed ways to get around the rules for customers whose transactions in dollars were sent to the United States, including at Deutsche Bank New York.

The goal was to avoid those payments from being scrutinized in the United States, which could lead to processing delays or the Fed freezing accounts.

One method was to remove details about sanctioned businesses in messages that banks send to each other to facilitate payments. That allowed the messages to slip through U.S. banking procedures for catching transactions from sanctioned businesses, the NYDFS said.

Some non-U.S. employees who worked with numerous Iranian, Libyan and Syrian customers were considered experts in the procedures, known as "OFAC-safe." The acronym refers to the Office of Foreign Assets Control, a U.S. Treasury Department unit that oversees and enforces trade sanctions.

Deutsche Bank employees also wrote a training manual for new hires who processed payments in an overseas office which explained how to handle transactions where sanctions were a concern.

"Banks under embargo of the US (e.g., Iranian banks) must not be displayed in any order to [Deutsche Bank New York] or any other bank with American origin as the danger exists that the amount will be frozen in the USA,” the manual said, according to regulators.

A bank manager told staff about a customer that was so pleased about the handling of U.S. dollar transactions related to Iran and Syria that it “used the opportunity to enquire whether we can also do USD payments into Burma/Myanmar,” according to regulators.

(Reporting by Suzanne Barlyn; Editing by Chizu Nomiyama, Richard Chang and Andrew Hay)