The regulator said less than RUB 800 million in the trades were detected in the first quarter of this year.
The name of one of the world’s biggest FX interbank dealers – Deutsche Bank AG (ETR:DBK), was implicated in a mirror trading scandal after an internal investigation at the bank found about $10 billion in such trades were conducted through its Moscow office during 2011-2015.
A report by Bloomberg on Tuesday, referring to a statement by the Central Bank of Russia, suggests that Deutsche Bank was not the only lender that was involved in such trades. The central bank said other foreign institutions were also involved in the mirror trading but did not name any particular entity.
The Russian regulator said in its statement to Bloomberg that it had found about RUB 750 billion ($13.5 billion at average exchange rates over the period, or $12.7 billion at rates today) in the mirror trades from 2014 to 2016. Less than RUB 800 million in the trades were detected in the first quarter of this year, according to the Bank of Russia, which explains why the efforts to clamp down on illicit mirror trading had been minimized.
The Bank of Russia said it took away the licenses of more than 100 local brokers involved in the mirror trading, but did not mention any names.
In January this year, the New York State Department of Financial Services (DFS) announced that Deutsche Bank AG and its New York branch will have to pay a $425 million fine and engage an independent monitor as part of a consent order entered into with the DFS. The penalties related to violations of New York anti-money laundering laws via a “mirror trading” scheme among Deutsche’s Moscow, London and New York offices that laundered $10 billion out of the Russian Federation.
DFS’s investigation found that Deutsche failed numerous times to stop the scheme as a result of compliance issues.
According to DFS’ findings, a number of companies that were clients of Deutsche’s Moscow equities desk issued orders to purchase Russian blue chip stocks, always paying in Russian rubles. Shortly afterwards, a related counterparty would sell the identical Russian blue chip stock in the same quantity and at the same price through Deutsche Bank’s London branch. The counterparties involved were closely related and the trades were usually cleared through Deutsche Bank Trust Company of the Americas (DBTCA). The selling counterparty was typically registered offshore and would be paid for its shares in US dollars. The DFS investigation shows that at least 12 entities were involved, and none of the trades had any legitimate economic rationale.
Also in January, the UK Financial Conduct Authority (FCA) announced it was imposing a fine of £163,076,224 on Deutsche Bank over failures to maintain an adequate AML control framework from January 1, 2012 to December 31, 2015. This marked the biggest financial penalty for AML controls failings ever imposed by the UK financial regulator.
Deutsche Bank paid a fine of RUB 300,000 to the Bank of Russia over violations found during the internal investigation.
In February this year, the Russian edition of Forbes reported that Swiss bank Credit Suisse is allegedly conducting an internal probe into its Moscow office, with the investigation concerning mirror trades. According to sources in the bank, the probe has started not later than December 2016. Credit Suisse was reported to be investigating two of its own employees, engaged in treasury operations in the Russian office, as well as a number of external financiers, including the activities of a broker. One of the counter-agents of Credit Suisse said that the volume of deals investigated is up to tens of millions of dollars a day.