Photo Illustration by The Daily Beast/Getty/AlamyYesterday, The
New York Times reported that Deutsche Bank had reluctantly and belatedly filed a Suspicious Activity Report (SAR) with FinCEN, the Treasury’s Financial Crimes Enforcement Network, on Jeffrey Epstein earlier this year for engaging in suspicious international financial transactions.Deutsche Bank filed this SAR as it sought to distance itself from the financier—and years after concerns about Epstein’s accounts had been flagged internally, according to the Times. Bank authorities quickly pointed out that the filing of the SAR does not mean that Epstein’s transactions were actually improper. Banks sometimes over-report transactions to the government to be on the safe side. That would certainly be a first for Deutsche Bank.Before we fillet Deutsche’s past spotty history with anti-money laundering compliance, let’s acknowledge the potential significance of the Epstein SAR. In an earlier article, we discussed Epstein’s alleged sex trafficking and the mystery surrounding his wealth accumulation. Epstein’s attorney’s filed a bare-bones financial statement at his bail hearing outlining approximately $559 million in assets. Federal agents executed a search warrant on Epstein’s mansion, which turned up a safe with thousands of dollars in cash, a dozen loose diamonds and an Austrian passport in a fake name with a Saudi address. Send The Daily Beast a TipEpstein had played at being a successful hedge fund manager but few in the industry were aware of any trades that he has made. So how did Epstein accumulate his millions if not billions?The SDNY has opened up a federal sex-trafficking investigation into Epstein and while the source(s) of Epstein’s wealth piques the curiosity of the masses, SDNY really had little firm basis to open up a criminal financial investigation—until now.The filing of SARs has proved critical in the past to the successful prosecutions of
Paul Manafort and Michael Cohen. They were also the financial enzymes that triggered the successful investigations of ex-Governor Elliot Spitzer and past Speaker of the House Dennis Hastert.When Deutsche Bank finally bit the bullet and filed a SAR on Epstein, they provided authorities in SDNY with a basis—“reasonable cause”—to file an ex parte request with the IRS for Epstein’s tax returns for the past several years, covering the period immediately proximate to Epstein’s questionable international financial transactions. SDNY can now articulate the nexus between Epstein’s tax returns and potential illegal activity with “reasonable cause”—an essential element of Internal Revenue Code (IRC) Section 6103, the disclosure section of the IRC that seems to have throttled
Robert Mueller and the SDNY in any quest for the returns of
President Trump and/or Individual-1.Once tax returns are secured, Schedule B can be scrutinized and cross-referenced with the required filing of Foreign Bank Account Records (FBARs) by Epstein with FinCEN. Wire transfer records should be readily available from Deutsche Bank and financial investigators can backtrack all the way to the Swiss Bank account apparently opened by Epstein at HSBC Private Bank (Suisse) in 2006.Financial investigators can thoroughly explore all new bank accounts and the likely plethora of financial transactions through analysis of Deutsche Bank records as well as Epstein’s previous account record at JP Morgan Chase, where he was a client from the late 90s until 2013.Once financial records are fully recorded and analyzed via comprehensive spreadsheets, federal agents can conduct informed interviews of such potentially key witnesses as Epstein’s “tax and accounting expert,” Harry Beller. Once federal investigators have a baseline understanding of Epstein’s finances they can contemplate exploring the tentacles of Epstein’s offshore business dealings, through his company Liquid Funding Ltd, in addition to a number of other shell companies allegedly favored by Epstein and facilitated by his financial enabler Deutsche Bank. The International Consortium of Investigative Journalists (ICIJ) has charted out multiple connections, addresses, and officers of this apparent offshore shell company registered in Bermuda that includes well-known business executives in addition to Deloitte and Price Waterhouse accounting firms. Each of these prospective witnesses and business entities will need to be contacted and confronted in light of the Deutsche Bank SAR, which is suggestive of international financial activities by Epstein that may include “illegal activities,” according to the Times report.Only after the above interviews are conducted should federal authorities contemplate contacting such well-known business luminaries that the media has associated with Epstein, including Leslie Wexner, Leon Black, and Glenn Dubin. A comprehensive financial investigation of Epstein can be conducted parallel to any sex-trafficking investigation by SDNY. It should be noted that inquiries of offshore financial improprieties can be very time-consuming given the difficulties in obtaining documentary evidence pursuant to various international treaties and agreements (MLATs).While the Epstein investigation takes its course, questions must be asked as to what took Deutsche Bank so long in filing the Epstein SAR.The Times reports that Epstein was a client of Deutsche’s private-banking division up until earlier this year, when the bank ended its relationship. Sources told the paper that the bank provided Epstein with “loans, wealth-management accounts, and trading services.” Compliance officers reportedly flagged the transactions of Epstein’s company at one point, but bank managers are said to have dismissed their concerns, because “there was nothing illegal about the transactions” and he was a “lucrative client.”This wasn’t the first time Deutsche Bank management overruled their frontline anti-money laundering (AML) personnel.The New York Times reported that AML specialists employed at Deutsche Bank identified multiple suspicious financial transactions during 2016 and 2017 entered into by entities connected to
Donald Trump and
Jared Kushner, and that they reported these transactions to management for the purpose of filing Suspicious Activity Reports with FinCEN.According to five sources, the Times reported, management declined to process and forward the prepared SARs to the Treasury Department as part of the bank’s anti-money laundering protocol.This was an AML protocol mandated by the authorities after substantive fines (almost $1 billion) were imposed on Deutsche for their ineffective compliance efforts relative to the so-called “mirror trades,” which laundered $10 billion out of Russia.While the New York State Department of Financial Services and Britain’s Financial Conduct Authority focused their penalties on the “mirror trades” entered into by Deutsche Bank’s
Moscow office during the period between 2010–2014, it is the Federal Reserve’s action that is most germane here. When the Fed imposed the $41 million penalty in May 2017, they also announced a Consent Cease & Desist order against Deutsche Bank to address unsafe and unsound practices in the firm’s domestic banking operations. The Fed identified failures by Deutsche’s U.S. banking operations to maintain an effective program to comply with the Bank Secrecy Act and anti-money laundering laws. The Consent Order required Deutsche Bank to improve its senior management oversight and controls related to compliance with anti-money laundering.It has been reported that the Federal Reserve has opened up a new inquiry of Deutsche’s AML program.Perhaps it is this inquiry that compelled Deutsche Bank to finally file the Epstein SAR. The Times further reports that Deutsche is conducting an internal investigation into its relationship with Jeffrey Epstein. “We’re still trying to get our arms around it,” a bank official told the paper.But Deutsche Bank has exhibited a resistance to come clean in the past. The New York State DFS report stated that the
Russian scheme perpetrated by Deutsche “highlights what has been a pervasive culture at Deutsche of skirting regulations to pad profits and personal bonuses.” Subsequent to the “mirror trades” money laundering penalties, and after suffering substantive damage to their reputation, Deutsche Bank started on the path of doing the right thing when it decided to bring in outside financial professionals to dig in and conduct an internal inquiry called Project Square with regard to the “mirror trades.”George Thoma, a reputable attorney from the tony Shearman & Sterling law firm, was hired to conduct a thorough internal review of the “mirror trade” transactions that caused so much consternation. Thoma analyzed over 2,000 trades before he was cut short and let go a full two years before his contract was up. Thoma reportedly was pushing to investigate Chairman Paul Achleitner and was mounting intensive inquiries into Deutsche Bank executives. Deputy Chairman of Deutsche Bank Alfred Herling criticized Thoma for being “overzealous.”Not too much should be expected from Deutsche’s internal Epstein review. Perhaps whistleblower Eric Ben-Artzi had it right when he stated that “there was cultural criminality” at Deutsche Bank: “Deutsche was structurally designed by management to allow corrupt individuals to commit fraud.”Is that why the rich and powerfully connected such as Trump, Kushner and now Epstein were attracted to Deutsche Bank?Perhaps a zealous criminal financial investigation of Epstein will shed some light on this question where the multitude of previous and currently open investigations of Deutsche Bank have not.In the immortal words of Yogi Berra—it ain’t over til it's over!