Deutsche Bank fined $630m over Russian mirror trades

Deutsche Bank has agreed to pay nearly $630m ($425m) to UK and US regulators to settle probes into whether it helped covertly move as much as $10 billion out of Russia through a process known as "mirror trading."

New York and British authorities issued the fine on Monday over claims the money was moved out of Russia using so-called mirror trades among the bank’s Moscow, London and New York offices, said New York State’s Department of Financial Services (DFS).

The DFS legal document which details the case says: "By converting rubles into dollars through security trades that had no discernible economic purpose, the scheme was a means for bad actors within a financial institution to achieve improper ends while evading compliance with applicable laws."

The German lender will pay $425 million (£340 million) to New York's Department of Financial Services and £163 million the FCA. The fines are the latest development in a string of legal woes for the German banking giant, coming less than two weeks after the bank finalised a $7.2bn settlement with the Department of Justice over its role in the 2008 global financial crisis.

"Mirror trades" involved a Russian client first buying a stock in roubles from Deutsche Bank's Moscow office. The same stock would be sold by another party with close ties to the original player in London and the trade would be paid for in dollars. Except rather than those dollars being converted into roubles for the original client, they would go to an overseas territory such as Cyprus, Estonia, or Latvia, to a bank account closely connected to the originally party.

In this way Deutsche Bank helped people move money out of Russia and also cover its tracks, moving an approximate $6 billion this way, according to regulators. 2,400 pairs mirror trades were executed between April 2012 and October 2014. A further $3.8 billion may have been laundered out of Russia through suspicious one-sided trades, the FCA says.

The New York authorities said in a statement they were joined by Britain’s Financial Conduct Authority in penalising the bank after finding pervasive weaknesses in Deutsche Bank’s internal safeguards for money laundering and client risk.

Deutsche Bank said that it's still cooperating with other investigations by regulators and law enforcement agencies into the Russian trades.