Compliance: Conformity with the law and adherence to regulations and standards
In our view, responsible corporate governance does not only mean adherence to laws, regulations, and standards. It requires a stringent compliance system. We have defined strict rules and guidelines for our staff across the entire spectrum of our areas of activity. Through our conformity with the law, we ensure that the company, its shareholders, clients and employees are protected as comprehensively as possible.
We expect all of the employees of Deutsche Bank to adhere to our compliance standards – by conducting themselves honestly, responsibly and ethically. Our Code of Ethics describes the values and standards for ethical business conduct and serves as the guiding principle for all of our interactions – regardless of whether they are with clients, competitors, business partners, government and regulatory authorities, shareholders or among one another. At the same time, it forms the foundation of our compliance principles, which provide our staff with precise guidelines for proper behavior. That is how we strive to ensure conformity with all applicable laws, regulations and standards.
In order to promote our responsible behavior on the part of our staff, we have expanded our mandatory training on compliance issues. Failure to complete mandatory compliance trainings now carries clear consequences, for example in regard to compensation.
Furthermore, to support our controls systems we have substantially expanded our “Red Flag” monitoring system. It reports all violations of compliance requirements in specific areas.
“We are spending 1 bn € to reinforce our systems and controls and adapt these to changes in regulation by 2015. We significantly strengthened our compliance department, adding some 200 people in 2013 and with plans to hire a similar number in 2014.”
Our Compliance Control Framework
The Compliance department of Deutsche Bank is independent of our operational business. Using our Compliance Control Framework as a basis, we are raising the level of awareness of conformity with the law in our operational business areas. The framework specifies the functions of the Compliance team in detail.
The team is responsible for:
- providing advice to individual business units on applicable laws, directives, standards, and regulations as well as providing compliance support
- monitoring trades, transactions and business processes in order to identify any potential compliance risk
- developing globally or locally applicable principles, standards and guidelines for Compliance, communicating them and verifying adherence
- maintaining the Bank’s internal watch and restricted lists of projects to which special attention must be paid
- helping to achieve adherence to the Bank’s internal confidentiality regulations (‘Chinese walls’)
- implementing any measures arising from the anti-money laundering program
- ensuring that any occurrences which give reason to suspect money laundering or the financing of terrorism are identified and reported to law enforcement authorities
- providing regular training and education for staff on the applicable regulations, rules and internal standards
- coordinating risk control and monitoring the management of reputational risk
- communicating with regulatory agencies around the world on a daily basis
Our anti-money laundering (AML) program
Our anti-money laundering program provides strong support for international efforts to combat money laundering, financing terrorism and other criminal acts. We scrutinize clients and current transactions using meticulous procedures and an automated monitoring system through this compliance program.
The Deutsche Bank anti-money laundering standard complies with the German Anti-Money Laundering Act and the guidelines of the German banking supervisory authority. It is also in line with the recommendations of the Financial Action Task Force on Money Laundering, an intergovernmental organization.
Our anti-money laundering requirements apply worldwide to all business units of the bank, regardless of their location. All our employees and senior managers are required to comply with them to prevent our name or our products and services from being misused for money laundering purposes. To ensure that we always apply the best possible compliance practices, we routinely review our goals and strategies for the prevention of money laundering.
How we combat corruption and bribery
Within the scope of our compliance program, Deutsche Bank has committed itself to fully complying with all local and international anti-corruption and anti-bribery laws. Our employees and senior managers are strictly prohibited from receiving, accepting, offering, paying or authorizing any bribe or any other form of corruption. Deutsche Bank also expects transparency and integrity in all business dealings to avoid any improper advantage or the appearance of questionable conduct on the part of employees or third parties with whom we do business.
To ensure compliance, Deutsche Bank has an anti-corruption policy that is backed by:
- appropriate compliance training measures for staff
- recording and monitoring of gifts and invitations
- a worldwide whistleblowing hotline for reporting suspicious cases anonymously
- risk-based procedures for monitoring third parties
Using “Red Flags” to monitor risk-related behavior
The Risk Culture program’s Red Flags initiative uses objective measures to assess employees’ adherence to risk-related policies and processes. It allows senior managers to address risks more effectively and creates a stronger link between behavior and reward.
Employees in breach of an applicable policy or process receive a Red Flag. All Red Flags are risk-weighted depending on the severity and frequency of the incident. Aggregated Red Flag scores are taken into account in reviews of performance, pay and promotion.
Since introducing Red Flags, the number of breaches has decreased steadily, indicating a positive change in risk-related behaviors.
How we combat financial crime
How we assess and accept clients
How we check and approve new products
We are committed to providing only products and services that create value for clients and shareholders through meeting the clients’ needs. Our New Product Approval (NPA) processes provide the scrutiny necessary to achieve these aims and to ensure that we can confidently offer clients our products and services.
NPA processes apply to all new product offerings, including variations to existing products. All product developments must be approved by key control functions, including Compliance and Anti Money Laundering. NPA committees at the regional and divisional levels must approve developments considered “material,” including new risk factors or businesses.
In addition, any features causing concern, such as potential reputational impact on the bank, are escalated to the relevant management approval committees, such as the Regional or Group Reputational Risk Committees.
Data protection: Preventing abuse, protecting rights of self-determination
Comprehensive data protection policies, rules, standards and processes apply to data protection in our day-to-day operations. They ensure compliance with all relevant statutory regulations, which may vary considerably from one country to another.
Preventative measures and thorough controls help prevent loss of data and violations of data protection regulations. We always investigate complaints thoroughly. We provide regular training in order to raise awareness of data protection among our staff and to ensure compliance with regulations.
Our Group Data Protection (GDP) office coordinates, assesses and monitors practices in this field. It works closely with a network of global data protection experts within the Bank.
The European Union is currently planning a revision of its data protection directive. Deutsche Bank has already implemented essential elements of the accountability principle that is being discussed in this context.
Whether in the area of money laundering, corruption, or financial crime – the compliance management system of Deutsche Bank is geared to strict conformity with the law.
Extensive training reinforces our standards
97% of the global bank
completed Compliance, Financial Crime and Risk Culture trainings during 2013.
“If we cannot obtain or retain business without improper conduct, then we do not engage in that business.”
Allegations around Manipulation at the Foreign Exchange Market
1. What are the allegations that various banks face?
As regulatory investigations are non-public, we can only comment on items that have been publicly disclosed in the media.
On June 12, 2013, a Bloomberg article alleging potential manipulation and other potential misconduct by large FX Houses was published. DB is one of the largest FX Houses worldwide. This potential misconduct was reported to have happened daily over the last years; it was reported to involve the WM/Reuters 4pm Benchmark. This benchmark provides, in essence, daily exchange rates for different currency pairs and is being derived from underlying market transactions.
Toward the end of the 2014, various media reports asserted that certain regulators were investigating whether Deutsche Bank used automated, algorithm initiated trading strategies and a practice known as “last look” on its electronic FX trading platforms to manipulate FX rates.
In February 2015, various media outlets reported that the U.S. Department of Justice is inquiring into whether certain market participants misled customers in connection with the marketing of foreign-exchange structured products.
2. What did Deutsche Bank do in light of the allegations?
Deutsche Bank moved quickly to launch a comprehensive internal investigation into the matter once becoming aware of potential issues in the FX market; the Bank deals with the allegations in a very serious way.
External counsel and external subject matter experts have been included into the investigation setup and the Bank has devoted a significant amount of resources to said internal investigation. The internal investigation is comprehensive to review the conduct in question; we are committed to conduct a robust review in every reasonable way and much broader than the allegations in the Bloomberg article. The investigation has been evolved and adapted to address the allegations identified above and all associated regulatory inquiries.
DB and its external counsel are fully cooperating with all FX related investigations being conducted by various regulators.
3. Have you found evidence of allegations?
DB’s internal investigation is ongoing. To date, we have not found evidence supporting (i) the allegations publicized in 2013 regarding widespread misconduct surrounding the WM/Reuters 4pm fix; (ii) the allegations publicized in 2014 concerning potentially manipulative FX electronic trading algorithms or the use of last look; or (iii) the allegations publicized in 2015 regarding misconduct in connection with the marketing and offering of foreign exchange structured products.
We are committed to timely addressing any potential wrongdoing; this commitment is unwavering as to any misconduct of any nature we have found or may find during the course of the review.
We have used the investigation to identify further areas that require further strengthening of the control environment.
4. What have you done to improve the control framework around the area?
The Bank continually assesses businesses, products and the control environment and takes appropriate corrective action where necessary to meet our standards.
In line with our strategic objective to strengthen the control framework, Deutsche Bank has, to date, implemented a comprehensive Lessons Learned Programme and has already executed a significant amount of measures along all Business Divisions and Infrastructure Functions that are also partially induced by investigation observations; examples include:
- Rollout of enhanced communications guidance and surveillance alongside new policies regarding Market Conduct, and specific trainings of ~2,000 staff globally,
- Multiple benchmark submissions were withdrawn (or decided to withdraw) and the control environment around those benchmark submissions is being strengthened further.
Those measures were augmented by clear and direct communication from Senior Management emphasizing the Firm’s Values and Beliefs.
5. What can you tell us about the personnel measures?
The Bank is continually reviewing the conduct of our employees and we will continue to take actions that are appropriate if we determine that further employee conduct falls short of required or expected levels.
As of today, we can confirm media reports that five Deutsche Bank traders located in the Americas were terminated; other employees received other disciplinary measures.
6. What is the progress of the investigation?
Deutsche Bank’s investigation has been ongoing since August 2013 and has made meaningful progress.
Investigation resources are continually adjusted in line with the investigation’s requirements. Deutsche Bank is cooperating closely with all regulatory inquiries and investigations globally in that regard.
7. What can you tell us about settlements in the U.S. Civil Litigation?
Plaintiffs – domestic and foreign individuals that purportedly traded with defendants at the WM/Reuters London 4pm fix – allege that Deutsche Bank foreign exchange traders participated in a worldwide conspiracy with traders at other foreign exchange dealer banks to manipulate the foreign exchange market. Defendants reached a settlement with plaintiffs in the beginning of 2015. The media has reported that additional defendants are nearing the end of settlement negotiations.
8. What can you tell us about the regulatory settlements?
In November 2014, five banks reached settlements with certain regulators, including FCA, CFTC, OCC, in the aggregate amount of approximately USD4.3 bn. The media has reported that the DOJ is seeking felony pleas from certain banks.