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Deutsche Bank threatens to axe 1,000 clients in compliance push

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Deutsche Bank has warned almost 1,000 corporate clients that they will lose access to basic banking services within weeks because it has not received documents needed to verify their identity.

The Frankfurt-based lender has sent hundreds of the termination letters to blue-chip companies, underscoring how banks are scrambling to meet tougher anti-money laundering rules introduced by regulators around the world in recent years.

From the end of June, the affected clients will not be able to sign new contracts with Deutsche’s “trust and agency services” division, which provides vanilla banking products such as escrow, syndicated loans, structured finance and commercial paper. 

As many as three hedge funds operated by Blackstone were briefly in line to receive the letters, people familiar with the situation said, surprising executives at the world’s biggest asset manager who had just signed one of the biggest real estate financings on record with a different part of the German bank. 

Deutsche said the “standardised notification” was sent to hundreds of clients and that “in Blackstone’s case, we retracted the letter when it was clear the . . . due diligence process would be completed within the necessary timeframe”. 

People at both groups characterised the now-resolved incident as a technicality stemming from Deutsche’s routine efforts to bring its compliance files up to date, and said Blackstone had not been singled out for attention. 

The funds in question represent a small fraction of the bank’s business with Blackstone, and received uninterrupted service because the termination notice was rescinded before Blackstone received it.

“This was a minor clerical issue that has been resolved,” Blackstone said. “We have a terrific relationship with Deutsche Bank and continue to work actively with them across our firm.”

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Still, the hundreds of other affected clients have been told they have only a few weeks to overturn the termination notices by providing additional documentation, people familiar with the matter said. Contracts that have been signed will not be affected by the cut-off, according to the letters.

The episode is symptomatic of the headaches stringent know-your-customer compliance rules can cause for banks, which often result in frustrating paperwork and strained relationships with even the most important clients.

Deutsche has particular reason to be vigilant. 

German watchdog BaFin last year publicly rebuked the bank for anti-money laundering shortcomings — which installed an independent monitor to track improvements — and in 2016 was criticised by the UK regulators for “serious” and “systemic” failings in its controls. Then in February Deutsche was discovered to have cleared €160bn of potentially suspicious transactions for clients of Danske’s Estonia unit.

The German bank has also discovered serious failings in its anti-money laundering and sanctions controls that allowed cheques and high-value electronic payments to be processed without proper screening, the Financial Times reported earlier this week.



Via Financial Times

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