Bank of Russia finds RUB 750 billion of “mirror trades” in 2014-2016

Maria Nikolova

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.

Read this next

Metaverse Gaming NFT

Despite crypto winter, Fastex grabs $23.2 million in Fasttoken token sale

Fasttoken, part of the Fastex web3 ecosystem, has secured $23.2 million in financing through the private and public token sales of its native cryptocurrency Fasttoken (FTN).

Digital Assets

Iran to repay Russian debts in gold-backed stablecoins

A high-ranking member of the Russian parliament confirmed reports that his country was in talks with Iran to create a stablecoin for foreign trade settlements, to replace the dollar, ruble and Iranian rial.

Digital Assets

SEC denies Cathie Wood’s bitcoin ETF for second time

The approval of a regulated crypto derivative is still looking far less likely, as the US regulators have once again denied Cathie Wood’s application for a long-awaited spot bitcoin exchange-traded fund (ETF).

Executive Moves

Pavel Spirin promoted to Scope Markets CEO following Rostro acquisition

Belize-based FX and CFDs brokerage Scope Markets has promoted Pavel Spirin to take on an expanded role as the company’s chief executive officer. He replaces the outgoing CEO Jacob Plattner, who has also been a major shareholder since he resigned his position as managing director at GKFX.

Retail FX goes all-in on alternative investing, launches Rare Sneaker Portfolio

“The concept of curated Portfolios means that our members will be able to invest in categories like art, trading cards, royalties, and real estate without needing to become subject matter experts on individual assets.”

Industry News

State Street taps AWS and Microsoft for cloud and infrastructure solutions

“By standardizing and simplifying our technology operating model, we will be able to more quickly deploy client environments and launch new products and services, while continuing to enhance the resiliency of our technology environment and our business operations.”

Institutional FX

Bitpanda launches Investment-as-a-Service business for banks, fintechs, online platforms

“Financial institutions today have to ask themselves how they aim to cater the increasing demand for modern investing solutions. Building these Individually, means a high startup cost, and products that are often outdated before they are even launched.”

Institutional FX

Options expands market data feeds after partnership with Tools for Brokers

“Our integration with ACTIV Financial marked the beginning of a new era in market data availability and infrastructure. Our teams have come together to provide unparalleled, fully managed market data services alongside Options’ global connectivity and infrastructure.”

Industry News

Recruitment in financial services sector buoyant despite planned mass layoffs

“It remains to be seen what impact this will have on hiring levels within the financial services arena this quarter”, said APSCo, regarding the expected mass layoffs within the financial services sector in England & Wales.