By
Ricardo Swire
As a money laundering countermeasure, especially against ingenuity developed by drug traffickers and terrorists, banks mandated employees to submit Suspicious Activity Reports (SAR) on all irregular transactions. Not long ago select mega banks, represented by “The Clearing House (TCH),” officially requested changes to industry rules. TCH’s operation as a finance group offers deposit banking and payment services.
TCH is owned by commercial banking affiliates ABN AMRO, Bank of America, The Bank of New York, Bank One, Citigroup, Deutsche Bank, Fleet National Bank, HSBC, JP Morgan Chase Bank, Wachovia and Wells Fargo. The Clearing House Interbank Payments System (CHIPS), the National Check Exchange, the Electronic Payments Network (EPN) and Electronic Clearing Services (ECS) complete the collection.
One TCH recommendation is creation of an information sharing platform for financial institutions to distribute criminal transaction data. Establishment of the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) as investigative lead for banking compliance, rather than the regulatory Office of Comptroller of the Currency is another suggestion. FinCEN already shares potential threat data with law enforcement agencies.
In September 2013 banking giants Deutsche Bank AG was investigated by BaFin, a German regulator. Alarms sounded after Deutsche Bank staff delayed routine SARs provided to police. 2013 FinCEN statistics recorded 669,000 SARs, compared to nearly one million in 2016. According to the Heritage Foundation’s 2016 report banking sector expenses, billed as originating from compliance with money laundering rules, cost US$8 billion annually.
In December 2016 Deutsche Bank AG agreed to pay a US Department of Justice (DOJ) bestowed US$7.2 billion fine, recompense for fraudulently “mis-selling” residential mortgage supported securities. In January 2017 the New York Department of Financial Services (DFS) fined Deutsche Bank AG’s New York branch US$425 million, penalty for laundering Russian clients’ US$10 billion of unknown origin via offshore banks.
The “Mirror Trading” money laundering scheme operated between Deutsche Bank AG’s Moscow, London and New York branches. The bank helped convert Rubles to dollars, as well as camouflaged point of origin and ownership. Mirror Trading helps prevent participating investors from making decisions based on suspicion, greed or other human emotions. The automated algorithmic trading system connects with an investor’s account. Trades are allocated automatically and the investor separated from pondering difficult decisions.
Mirror Trading has distinct advantages over traditional algorithmic trading and there are two sides to each Mirror Trade. One side is called “The Pro.” The other side referred to as “The Follower.” The Pro hosts an account, monitors the stock market then trades utilizing pre-calculated strategy. The Follower is actually a Mirror Trader who searches the market for productive traders to mimic successful tactics. Deutsche Bank AG’s anti-money laundering compliance shortcomings allowed Russian masterminds to benefit. The United Kingdom’s Financial Conduct Authority awarded Deutsche Bank AG a £163 million fine, for Mirror Trading conducted in its jurisdiction.
The Mirror Trading participant paid for stock in Robles from Deutsche Bank AG’s Moscow branch. The stock was resold in US currency by a third party, connected to the original purchaser. Instead of the US$6 billion worth of payment’s conversion to Russian Robles, the cash was wired to offshore accounts in Cyprus, Estonia or Latvia. Between April 2012 and October 2014 2,400 pairs of Mirror Trades were processed, US$3.8 billion of unidentified Russians money laundered using 3,400 single sided trades made by the same investors.
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