A German bank that loaned US$300 million to Donald Trump played a prominent role in a money laundering scandal run by Russian criminals with ties to the Kremlin, the Guardian can reveal.
Deutsche Bank is one of dozens of western financial institutions that processed at least US$20 billion – and possibly more – in money of “criminal origin” from Russia.
The scheme, dubbed “the Global Laundromat”, ran from 2010 to 2014.
Law enforcement agencies are investigating how a group of politically well-connected Russians were able to use UK-registered companies to launder billions of dollars in cash. The companies made fictitious loans to each other, underwritten by Russian businesses.
The companies would default on these “debts”. Judges in Moldova then made court rulings enforcing judgments against the firms. This allowed Russian bank accounts to transfer huge sums to Moldova legally. From there, the money went to accounts in Latvia with Trasta Komercsbanka.
Deutsche, Germany’s biggest lender, acted as a “correspondent bank” for Trasta until 2015. This meant Deutsche provided dollar-dominated services to Trasta’s non-resident Russian clients. This service was used to move money from Latvia to banks across the world.
During this period many Wall Street banks got out of Latvia, citing concerns that the small Baltic country had become a centre for international money laundering, especially from neighbouring Russia.
In 2013, and under US regulatory pressure, JP Morgan Chase ceased providing dollar clearing services to the country.
From 2014, only two western lenders were willing to accept international dollar transfers from Latvian banks. They were Deutsche and Germany’s Commerzbank. Deutsche eventually withdrew correspondent services to Trasta Bank in September 2015.
Six months later, Latvian regulators shut down the bank. They cited repeated violations, and said the bank had failed to deal with its money laundering risk.
Latvia’s deputy finance minister, Maija Treija, said the money sent via Trasta was “either stolen or with criminal origin”.
The defunct bank was being used as vehicle to get money out of the ex-Soviet Union and “into the EU financial system”, she added.
Deutsche said it had significantly strengthened its systems and controls. It said that by the end of this year it will have hired more than 1,000 new staff in its compliance and anti-financial crime unit since 2015.
It added: “The bank has comprehensively reviewed its client onboarding and know-your-client processes and where necessary is exiting higher risk client relationships and markets.”
Commerzbank said it could not comment on its relationships with other banks. It said it put a high value on compliance. It said that suspicious transactions picked up during routine monitoring were reported to the authorities.
Deutche Bank ended its relationship with Trasta soon after Latvia’s regulator issued a warning, it is understood. In August 2015, the Financial and Capital Markets Commission stopped all transactions above €100,000.
Deutsche severed its relationship with the other key Laundromat bank - Moldova’s Moldindconbank – in 2012.
Ties with Russia are a matter of acute sensitivity for Deutsche. In February, it emerged that Deutsche had secretly reviewed multiple loans made to President Trump by its private wealth division to see if there was a connection to Russia. Trump owes Deutsche about US$300million.
Deutsche refused to comment on its internal review. Sources say the bank discovered no evidence of any Moscow link. That covers other members of the US president’s family who are also Deutsche clients. They include Trump’s daughter, Ivanka, her husband, Jared Kushner, and Kushner’s mother, Seryl Stadtmauer.