Streamlined responsibilities to combat financial crime
- Investment in people and processes to enhance controls
- Introduction of a new, risk-based approach to Know Your Customer
- New Anti-Bribery and Corruption policy to emphasize our zero-tolerance approach
Combating financial crimes, including money laundering, terrorist financing, sanctions and embargoes, bribery and corruption and fraud, requires international action as well as internal controls. We have long advocated sound international regulations and procedures against financial crime in order to ensure the stability of banks and the integrity of the international financial system. This helps to protect Deutsche Bank from being misused for criminal purposes.
In line with Deutsche Bank’s management approach to strengthen the oversight and controls framework (see Oversight and controls), we have continued to enhance our internal controls. As part of our second Line of Defense, we consolidated responsibility for all types of financial crime into a new Anti-Financial Crime (AFC) division. The Global Head of AFC reports directly to the Management Board, to whom quarterly reports are presented. In 2014, we invested further in controls and processes to improve our defenses, expanding the number of employees by almost 30 %.
Our risk governance structure is based on the principle that employees are our first Line of Defense, as each line of business is responsible for managing the risk inherent to its operations. In accordance with our values and beliefs (see Deutsche Bank’s Values and Beliefs), staff are encouraged to raise any questions or concern with managers or control functions. If necessary, they can use our whistleblowing hotline to address any concerns or malpractice in complete confidence. All reports are investigated independently and our policy prohibits retaliation.
We revised our whistleblowing policies and procedures in 2014, including the contact details for the Anti-Bribery and Corruption Team (ABC) and published guidance for managers on how to handle alerts from whistleblowers. We also provided training to almost 20,000 managers in relation to whistleblowing policies.
Preventing money laundering and terrorist financing
We target money laundering, terrorist financing and other financial crimes globally in accordance with the German Banking Act and other legislations. Complying with the regulations is fundamental for all of Deutsche Bank’s operations regardless of their geographic location. A dedicated team within the AFC unit is responsible for preventing money laundering and financing terrorism.
Our Anti-Money Laundering (AML) and Know Your Customer (KYC) policies aim to ensure:
- Compliance with regulations governing identification, authentication, recording and archiving
- Detection of suspicious transactions and processing internal suspicious activity alerts
- Developing, updating, and executing of internal policies, procedures and controls
- Clear definition of AML requirements to implement the Fund Transfers Regulation
These measures are implemented by the business and are evaluated and reviewed by the AFC function. They are updated at least annually. They expressly include the authority to prohibit individual transactions or business relationships.
Implementing economic sanctions and embargoes
Deutsche Bank and other financial institutions have an important role to play in supporting the implementation of economic sanctions and embargoes, and in preventing financing for terrorism.
We have a robust program in place to ensure compliance with sanctions and embargoes, as well as with the Bank’s own stringent internal policies and guidelines. The compliance program reflects the risks associated with Deutsche Bank’s diverse customer base and international activities. It includes reviewing customers before establishing their account and periodically thereafter, and monitoring financial transactions performed by or through the Bank to detect those which involve an entity or person subject to restrictions. We also conduct training and awareness activities regarding sanctions and embargoes across the Bank.
In 2014, we ran an internal campaign to increase awareness and provide clear guidance regarding sanctions and embargoes throughout Deutsche Bank. This campaign was particularly important to support the successful implementation of sectorial sanctions that were imposed by the EU and US in relation to the crises in Crimea and in the Ukraine in 2014. We raised awareness of the complex issues brought about by these sanctions by using a two-pronged approach, which utilized both established internal communication channels such as Deutsche Bank’s intranet and additionally reaching out specifically to relevant groups and individuals across a wide range of our businesses and control functions. In doing so, we ensured that all relevant business and control function personnel at Deutsche Bank were alerted to the issue at hand in multiple ways and received proactive and specific guidance they needed to ensure compliance.
Effective action against money laundering and terrorist financing relies on adequate and up-to-date information on client relationships. In this context, KYC standards and procedures are critical to promote high ethical and professional standards and to protect banking facilities, products, and services from criminal misuse.
Know Your Customer
is essential for mitigating risks
In 2014, we developed a new framework for a risk-based approach to KYC that is applicable to all business divisions and entities. The framework includes advanced methodologies to assess the underlying risk factors such as country, industry and product risk. This contributes to the attainment of a robust concept for the overall AML client risk rating itself.
The new KYC policy framework will be rolled out country-by-country through to 2016. To ensure that standards are applied consistently, we established a KYC Center of Excellence – a team of subject matter experts providing central oversight and advice, including guidance on best practices and new regulatory developments. They consider any potential exemption from KYC standards and submit a recommendation to the AFC Senior Management (members are the Regional Heads of AFC, including Functional Heads of Embargo, Fraud and ABC), which is headed by the Global Head of AFC for a final decision.
Our KYC policies provide clear standards for governance and management oversight, including standardized reporting and documentation requirements and escalation of potential risks. Special scrutiny is required for relationships with high-risk clients and with clients known as “politically exposed persons”. They must be reviewed and signed off by senior management and the AFC organization.
Client relationships are assessed prior to adoption and on a regular basis throughout the relationship. We require monthly screening of existing clients against internal and external lists of adverse information, including matters related to terrorist financing, financial crime, corruption or tax evasion. We extended the scope of our screening in accordance with the review of KYC standards. Screening is already applied to half of the relevant client data sources. The roll-out of this wider screening scope will be completed in 2015.
Acting against bribery and corruption
towards bribery and corruption
We do not tolerate bribery or any form of corruption and we do not provide or accept improper inducements in the course of our business dealings. All employees and third parties who act on Deutsche Bank’s behalf are strictly prohibited from having any involvement in acts of bribery and corruption. We are not interested in business that can only be obtained or retained through improper conduct.
We created a dedicated Anti-Bribery and Corruption (ABC) team in 2013 to provide specialist legal, regulatory and compliance advice, and to enhance policies, procedures and controls. We continued to enhance the governance, resources and processes of the team in 2014, completing a network of regional ABC heads. The ABC team now comprises nine employees globally.
representatives from all businesses participated in workshops to examine financial crime risks
In 2014, we concluded a major global fraud, bribery and corruption risk assessment. We held workshops with approximately 500 representatives from all business divisions in six locations worldwide to examine inherent risks across Deutsche Bank and the controls designed to mitigate them. This exercise prioritized the residual risks for each division and made recommendations to address them. We have prioritized our ABC program to tackle the key risks that were identified. In 2015, we will focus on the risks posed by third parties, employees and gifts and entertainment.
In 2014, we introduced a new policy that emphasizes our zero tolerance approach. The policy clarifies Deutsche Bank’s approach to political contributions, charitable donations and hiring individuals connected to public officials and clients. It also prohibits cash payments and per diems and explains the requirements. The policy is applicable to all employees in all regions and divisions, and was communicated globally via regional announcements.
Combating other criminal activities
We significantly increased our investment in this area with the creation of a new Anti-Fraud and Investigations team responsible for developing and monitoring measures to prevent fraud and other criminal activities, that could endanger Deutsche Bank’s assets, as required by German law. It will coordinate the prevention, detection and investigation of internal and external fraud across all divisions. We will continue to invest in 2015 to enhance monitoring and fraud prevention.
A Group Financial Crime Governance Committee, chaired by the Global Head of AFC, is being formed at group level to establish a central, group-wide evidence collection office covering all aspects of Financial Crime. The Committee will receive quarterly reports from the regional Financial Crime Governance Committees, which are chaired by the respective Regional Heads of AFC.
Training employees to improve defenses
All of Deutsche Bank’s employees at all levels have an important role to play in preventing financial crime. To assist them, we provide training for all employees, including the members of the Group Executive Committee.
Our measures to train employees to combat financial crime have been rolled out globally to 89,000 people in 2014 and 2015. By end of 2014 more than 27,000 employees completed the Combating Financial Crime online training course, which covers ABC, KYC, AML, terrorist financing, sanctions and embargoes, market conduct as well as fraud and information protection.
A new ABC online training course provides a comprehensive overview of bribery and corruption risks. More than 57,000 employees completed the course, which covers the extraterritorial application of some laws and topics, including gifts and entertainment and facilitation payments. Employees in the Private and Business Clients division receive a separate Compliance Essentials course, which covers anti-corruption topics tailored to their specific activities. Members of the Group Executive Committee received a one-on-one briefing. We also provided ABC briefings to consultants who develop business relationships and introduce or procure business transactions.