Compliance

Germany's Two Biggest Banks Start Settlement Talks With US Over Sanctions Breaches - Report

Tom Burroughes, Group Editor, London, 9 July 2014

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After hammering BNP Paribas with a fine for sanctions breaches, US authorities are now in settlement talks with two of Germany's biggest banks, reports say.

Two of Germany’s largest banks, Deutsche Bank and Commerzbank, have started settlement talks with US authorities over dealings with countries blacklisted by the US, Reuters reported, quoting an unnamed source. The move comes after last week's huge fine meted out to BNP Paribas.

The settlement talks have only just started; the outcome and timing is unclear, the report said. The report said both banks declined to comment.

At the close of trading yesterday, shares in Commerzbank were down 5.61 per cent; shares in Deutsche Bank - the country's largest bank - were down 2.13 per cent.

A report first came from the New York Times that settlement talks with Commerzbank were in the works. This bank is the second-largest lender in Germany and was bailed out by the German government in the 2008 financial crash; it has had to dispose of non-domestic assets as a condition of receiving state aid, including its then-UK possession, Kleinwort Benson, several years ago.

Commerzbank is accused of laundering money connected to Sudan and Iran. Reports said it could pay up to $500 million in fines and that a settlement will lead to a deal with Deutsche Bank.

Reuters has reported that Deutsche Bank, Banamex USA, the US arm of Citigroup Inc's Mexican banking group Banamex, and two major French banks - Credit Agricole and Societe Generale, are among those being investigated for possible money laundering or sanctions violations.

Last week, the financial and political world was rocked by the record $8.97 billion fine imposed on France’s BNP Paribas for sanctions violations; the Paris-listed lender also has lost the right to conduct dollar-denominated deals for a year during 2015, and will have to employ a third-party bank for such transactions. The fine is greater than the bank’s annual profit for 2013. The issue has also soured Franco-US relations, prompting concerns that policymakers, while they often make tough pronouncements on money laundering, are at odds about the appropriate punishment when actual cases come to light.

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