MANHATTAN (CN) — Accused of turning a blind eye to suspicious cash withdrawals and legal settlements conducted on behalf of the late sex offender Jeffrey Epstein, Deutsche Bank reached a $150 million settlement with New York regulators on Tuesday.
“Whether or to what extent those payments or that cash was used by Mr. Epstein to cover up old crimes, to facilitate new ones, or for some other purpose are questions that must be left to the criminal authorities, but the fact that they were suspicious should have been obvious to Bank personnel at various levels,” says the consent order, filed this morning with the New York Department of Financial Services. “The Bank’s failure to recognize this risk constitutes a major compliance failure.”
Regulators claim that while Deutsche Bank properly classified Epstein as high-risk, it failed to adequately scrutinize his accounts for the kinds of activity that were markedly implicated by Epstein’s publicized past.
Under a 2007 nonprosecution deal with Epstein, federal prosecutors agreed not to pursue an underage prostitution case against him if he pleaded guilty to state charges in Florida.
The plea deal included a key clause that protected Epstein’s assistants Sarah Kellen, Nadia Marcinkova and others who allegedly helped bring underage girls to Epstein’s Palm Beach mansion for massage sessions that often became sexual.
“The Bank was well aware not only that Mr. Epstein had pled guilty and served prison time for engaging in sex with a minor but also that there were public allegations that his conduct was facilitated by several named coconspirators,” the settlement states. “Despite this knowledge, the Bank did little or nothing to inquire into or block numerous payments to named co-conspirators, and to or on behalf of numerous young women, or to inquire how Mr. Epstein was using, on average, more than $200,000 per year in cash.”
Although Deutsche Bank did not designate Epstein a “politically exposed person,” it did label him an “Honorary PEP” because of his proximity to the powerful, the 38-page consent agreement explains.
The settlement marks the first enforcement action by a regulator against a financial institution for dealings with Epstein, whose death was ruled a suicide after he was found handing in a prison cell last August while awaiting a sex-trafficking trial in the Southern District of New York.
“Banks are the first line of defense with respect to preventing the facilitation of crime through the financial system, and it is fundamental that banks tailor the monitoring of their customers’ activity based upon the types of risk that are posed by a particular customer,” Department of Financial Services superintendent Linda Lacewell said in a statement Tuesday. “In each of the cases that are being resolved today, Deutsche Bank failed to adequately monitor the activity of customers that the Bank itself deemed to be high risk. In the case of Jeffrey Epstein in particular, despite knowing Mr. Epstein’s terrible criminal history, the Bank inexcusably failed to detect or prevent millions of dollars of suspicious transactions.”
According to the settlement agreement, Deutsche Bank failed to flag suspicious transactions, including payments to individuals who were publicly alleged to have been Epstein’s co-conspirators in sexually abusing young women; settlement payments totaling over $7 million, as well as dozens of payments to law firms totaling over $6 million for what appear to have been the legal expenses of Epstein and his co-conspirators. Other payments were made to Russian models and to numerous women with Eastern European surnames. There were periodic suspicious cash withdrawals totaling over than $800,000 across approximately four years, and more payments went toward women’s school tuition, hotel and rent expenses.
According to the consent agreement, the relationship between Deutsche Bank and Epstein officially began on August 19, 2013, when the bank opened brokerage accounts for Epstein’s Southern Trust Company Inc., a self-described “database company and services” founded in the U.S. Virgin Islands in 2011, and Southern Financial LLC, a wholly owned subsidiary of Southern Trust Company.
A spokesman for the Frankfurt-based financial institution said on Tuesday said the company deeply regrets the association with Epstein and emphasized that it has been fully cooperative with investigative authorities.
“We acknowledge our error of onboarding Epstein in 2013 and the weaknesses in our processes, and have learnt from our mistakes and shortcomings,” a Deutsche Bank spokesman said Tuesday. “Immediately following Epstein’s arrest, we contacted law enforcement and offered our full assistance with their investigation,” he added.
The company says it has committed to investing in its internal controls and enhancing its anti-financial crime capabilities.
“To that end, we have invested almost $1 billion in improving our training, controls and operational processes, and have increased our anti-financial crime team to more than 1,500 people. Our transformation and strengthening continues,” a spokesman said Tuesday.
The settlement comes days after the Southern District of New York announced the arrest of Epstein’s alleged procurer and longtime co-conspirator, Ghislaine Maxwell.
Prosecutors claim that Maxwell recruited underage girls and facilitated abuse at Epstein’s New York mansion, estate in Palm Beach, Florida, and ranch in Santa Fe, New Mexico.
A Londoner who recently holed up in Bradford, New Hampshire, Maxwell is accused of helping to manage those properties between 1994 and 1997.
Maxwell, who faces up to 35 years in prison if convicted, faces a remote arraignment and bail hearing next week. Meantime she is detained at the Metropolitan Detention Center in Brooklyn.