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Deutsche Bank to Pay Penalty for Lapses in Ukraine Sanctions

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Deutsche Bank’s (DB - Free Report) U.S. unit has entered into settlement with The U.S. Department of the Treasury’s Office of Foreign Assets Control, under which the German lender has agreed to pay $583,100. The news was reported by Reuters.

The settlement is regarding the probe into violations of Ukraine-related sanctions. Under the terms, Deutsche Bank will be paying $157,500 for having wrongly processed a large payment through the United States that involved a property interest of an oil company in Cyprus designated under the Ukraine sanctions. Authorities are of the opinion that the bank did not conduct sufficient due diligence on the company.

Also, Deutsche Bank Trust Company Americas is required to pay $425,600 for processing payments destined for accounts at a designated financial institution. Per the article, the bank failed to stop the 61 payments because of lapses in its payment screening tools.

Deutsche Bank has said it will undergo a review of the apparent violation and accordingly take any necessary additional training or make changes to its internal procedures.

The company remains consistently involved in legal matters, of which some have been settled. However, this is likely to keep expenses on the higher side in the near term. In December 2019, it faced a fine by the Frankfurt prosecutors related to the investigation of German client interactions with offshore entities established by the German bank's Virgin Islands subsidiary — Regula Ltd. These legal settlements have made a significant impact on its financials.

Furthermore, in June 2020, Deutsche Bank entered into a settlement with the U.S. Commodity Futures Trading Commission over allegations of market manipulation and violations in swap data reporting. It paid a penalty of more than $10 million.

Our Take

Deutsche Bank's efforts to improve financials by offloading unprofitable businesses and continued investments in order to expand its fee income sources are commendable. However, the company continues to be plagued with several headwinds such as low rates and rising costs, and also it remains under the scrutiny of investors.

Shares of the company have gained 35.4% over the past six months against 8.3% decline recorded by the industry.

Deutsche Bank currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the past few years, several banks, including Credit Suisse (CS - Free Report) , Bank of Nova Scotia (BNS - Free Report) and Toronto-Dominion (TD - Free Report) have been accused of money laundering, spoofing and swap dealing, among others. The banks have been either charged with penalties or are still facing probes and lawsuits.

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