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Mar 21, 2017

The Guardian | World | Europe | Banking Global Laundromat: Bank That Lent $300m to Trump Linked to Russian Money Laundering Scam by Nick HopKings - March 21, 2017


theguardian.com

Nick Hopkins


The German bank that loaned $300m (£260m) to Donald Trump played a prominent role in a money laundering scandal run by Russian criminals with ties to the Kremlin, the Guardian can reveal.
Deutsche Bank is one of dozens of western financial institutions that processed at least $20bn – and possibly more – in money of “criminal origin” from Russia.
The scheme, dubbed “the Global Laundromat”, ran from 2010 to 2014.
Law enforcement agencies are investigating how a group of politically well-connected Russians were able to use UK-registered companies to launder billions of dollars in cash. The companies made fictitious loans to each other, underwritten by Russian businesses.
The companies would default on these “debts”. Judges in Moldova then made court rulings enforcing judgments against the firms. This allowed Russian bank accounts to transfer huge sums to Moldova legally. From there, the money went to accounts in Latvia with Trasta Komercsbanka.
Deutsche, Germany’s biggest lender, acted as a “correspondent bank” for Trasta until 2015. This meant Deutsche provided dollar-dominated services to Trasta’s non-resident Russian clients. This service was used to move money from Latvia to banks across the world.
During this period many Wall Street banks got out of Latvia, citing concerns that the small Baltic country had become a centre for international money laundering, especially from neighbouring Russia.
In 2013, and under US regulatory pressure, JP Morgan Chase ceased providing dollar clearing services to the country.
From 2014, only two western lenders were willing to accept international dollar transfers from Latvian banks. They were Deutsche and Germany’s Commerzbank. Deutsche eventually withdrew correspondent services to Trasta Bank in September 2015.
Six months later, Latvian regulators shut down the bank. They cited repeated violations, and said the bank had failed to deal with its money laundering risk.
Latvia’s deputy finance minister, Maija Treija, said the money sent via Trasta was “either stolen or with criminal origin”.
The defunct bank was being used as vehicle to get money out of the ex-Soviet Union and “into the EU financial system”, she added.
Deutsche said it had significantly strengthened its systems and controls. It said that by the end of this year it will have hired more than 1,000 new staff in its compliance and anti-financial crime unit since 2015.
It added: “The bank has comprehensively reviewed its client onboarding and know-your-client processes and where necessary is exiting higher risk client relationships and markets.”
Commerzbank said it could not comment on its relationships with other banks. It said it put a high value on compliance. It said that suspicious transactions picked up during routine monitoring were reported to the authorities.
Deutche Bank ended its relationship with Trasta soon after Latvia’s regulator issued a warning, it is understood. In August 2015, the Financial and Capital Markets Commission stopped all transactions above €100,000.
Deutsche severed its relationship with the other key Laundromat bank - Moldova’s Moldindconbank – in 2012.
Ties with Russia are a matter of acute sensitivity for Deutsche. In February, it emerged that Deutsche had secretly reviewed multiple loans made to President Trump by its private wealth division to see if there was a connection to Russia. Trump owes Deutsche about $300m.
Deutsche refused to comment on its internal review. Sources say the bank discovered no evidence of any Moscow link. That covers other members of the US president’s family who are also Deutsche clients. They include Trump’s daughter, Ivanka, her husband, Jared Kushner, and Kushner’s mother, Seryl Stadtmauer.
In January, the UK and US imposed record $630m fines on Deutsche for its role in another money laundering scam run out of its Moscow office. The bank failed to prevent $10bn of Russian money being laundered in a complex “mirror trades” operation. The wealthy Russians that used the scheme have not been identified.
Deutsche’s Private Bank – the division that lends to Trump – appears in the Global Laundromat scheme. Sources suggest that many of its clients are rich Russians, typically with personal assets of $50m-plus. According to Germany’s Süddeutsche Zeitung, Deutsche processed more than $24m of Laundromat cash in 209 transactions.
Records obtained by the Organised Crime and Corruption Project (OCCRP) and Novaya Gazeta from anonymous sources show how the money was spent. Much of it vanished into opaque offshore companies. Some of it went on luxury items including diamonds, leather jackets, and home-cinema equipment.
One of Deutsche’s high net worth customers blew €500,000 at Mahlberg, a German jewellery firm. The payment in January 2013 was made by Seabon Limited, a Laundromat company registered in Tooley Street, London. More than $9bn was funnelled via Seabon, records show.
Almost €1m went to a Munich electronics firm, Rohde & Schwarz, which produces surveillance technology for security services and police.
Often, the explanation for high-volume payments was fake. The money spent on watches was marked down on the bank wire transfer as a payment for “computer equipment”.
Another $500,000 payment was made to a London fur broker, Gideon Bartfeld. Bartfeld said the money had arrived from Deutsche Bank New York, before being sent on to the Bank of New York Mellon, which paid the invoice. Trasta – the bank that first sent the money to Deutsche – did not appear in any paperwork, he added.
Bartfeld said the payment came via two “highly reputable and respected” global banks. He said: “Consequently, we received this payment in full confidence [as they] were satisfied that the payment met their rigorous due diligence and compliance requirements.”
The fur trader said he had known many of his Russian clients for years. His main markets were Russia and China, he added. There is no suggestion that Bartfeld or Mahlberg or Rohde & Schwarz were involved in wrongdoing.