This is the first time that a bank has been punished for business dealings with the disgraced and convicted sex offender, who died last year. The Jeffrey Epstein saga continues to cause waves because of his friendships with scores of famous people in politics, royalty and entertainment.

Deutsche Bank has agreed to pay $150 million to settle claims that it had allowed weak internal controls, for example processing transactions of the late convicted sex offender and billionaire Jeffrey Epstein even though the man had a troubled history.

The New York State Department of Financial Services also mentioned Deutsche’s correspondent banking links with FBME Bank and Danske Bank Estonia as reasons for its punishment. Danske, based in Copenhagen, has been rocked by claims that it processed dirty money, and a number of its senior managers have left and been replaced.

“Onboarding [Epstein] as a client in 2013 was a critical mistake and should never have happened,” Christian Sewing, Deutsche Bank’s chief executive, said in a statement on Tuesday. “It is our duty and our social responsibility to ensure that our banking services are used only for legitimate purposes.”

The settlement was announced earlier this week and reports said that it is the first time regulators have punished a bank for having links with Epstein. After he died in August last year, the New York City medical examiner ruled that Epstein's death was a suicide by hanging. That ruling has been challenged by people claiming he was killed. 

The punishment of Germany’s largest bank adds another dimension to the Epstein saga, which has caused widespread media coverage because of his friendship with famous people, politicians and the likes of the UK’s Prince Andrew. Epstein’s former associate, Ghislaine Maxwell, has been arrested. 

In its statement, the NYSDFS said the punishment was meted for “significant compliance failures in connection with the bank’s relationship with Jeffrey Epstein and correspondent banking relationships with Danske Bank Estonia and FBME Bank." 

“Banks are the first line of defence with respect to preventing the facilitation of crime through the financial system, and it is fundamental that banks tailor the monitoring of their customers’ activity based upon the types of risk that are posed by a particular customer,” Superintendent Lacewell said. “In each of the cases that are being resolved today, Deutsche Bank failed to adequately monitor the activity of customers that the bank itself deemed to be high risk. In the case of Jeffrey Epstein in particular, despite knowing Mr Epstein’s terrible criminal history, the bank inexcusably failed to detect or prevent millions of dollars of suspicious transactions.” 

The department said that Deutsche Bank failed to properly monitor account activity conducted on behalf of the registered sex offender in spite of the “ample information” that was publicly available concerning the circumstances surrounding Epstein’s earlier criminal misconduct. 

Deutsche Bank processed hundreds of transactions totalling millions of dollars. These transactions should have forced the bank to tighten its scrutiny, the department said.

Some of the payments made by Epstein should have prompted the bank to investigate further into what was going on, the statement said. For example, there were payments to individuals who were publicly alleged to have been Epstein’s co-conspirators in sexually abusing young women; settlement payments totalling over $7 million, as well as dozens of payments to law firms totalling over $6 million for what appear to have been the legal expenses of Epstein and his co-conspirators; there were payments to Russian models; payments for women’s school tuition; hotel and rent expenses; and (consistent with public allegations of prior wrongdoing) payments directly to numerous women with Eastern European surnames; and periodic suspicious cash withdrawals - in total, more than $800,000 over approximately four years. 

Compounding the failings
The US authority said Deutsche’s failings were made worse by procedural failures, mistakes, and “sloppiness” in how the bank managed and oversaw the Epstein accounts. 

In the cases of Danske Estonia and FBME, the department concluded that Deutsche Bank failed to properly monitor the activities of their foreign bank clients with respect to their correspondent and dollar clearing business.  

“Danske Estonia, which is at the centre of one of the world’s largest money laundering scandals, suffered from inherent control failures that resulted in large quantities of money being moved on behalf of Russian oligarchs. Over the course of the years-long relationship between Deutsche Bank and Danske Estonia, Deutsche Bank was repeatedly put on notice of these failings and of the fact that few improvements were undertaken by Danske Estonia,” the US body said.

“Despite the fact that Deutsche Bank assigned Danske Estonia its highest possible risk rating, Deutsche Bank failed to take appropriate action to prevent Danske Estonia from transferring billions of dollars of suspicious transactions through Deutsche Bank accounts in New York,” it said. 

“Deutsche Bank’s relationship with FBME similarly represented a failure by the bank to act on red flags concerning a correspondent banking relationship with a foreign bank,” it added.