By Jenny Strasburg
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 23, 2019).
FRANKFURT -- Deutsche Bank AG has found a glitch in computer systems that retroactively scan corporate clients' transactions for suspicious activity, the latest sign of trouble in the lender's efforts to guard against potential money laundering by clients.
The glitch, which might have been in place for close to a decade, hampered a program that scans payments involving corporate clients after they pass through the bank so it can flag suspicious patterns to regulators, a person familiar with the matter said.
Regulators rely on such information, gathered from a range of financial companies, to prevent money laundering and terrorism funding through the global banking system.
The Deutsche Bank program in question "was configured erroneously with two out of 121 parameters defined incorrectly," the bank said. "Deutsche Bank is working on correcting the error as quickly as possible and is in close contact with the regulators."
The problem was discovered by employees in Europe and reported to regulators recently, and the bank is still investigating the problem, the person said. It is unclear what companies, countries or types of cash flows were affected by the transaction-review issues. Deutsche Bank found the problem during its latest revamp of money-laundering systems, which it started late last year.
The issue was first reported Wednesday by German newspaper Süddeutsche Zeitung, a day before Deutsche Bank's annual shareholder meeting in Frankfurt.
The bank's chairman and chief regulatory officer -- among other executives -- are braced for intense criticism for its share-price declines, meager profits and a seemingly endless series of compliance mishaps and regulatory investigations.
The lender's lagging performance and years of executive turnover have caused turmoil in its compliance ranks and constrained its ability to fix computer systems, many of them described by executives as outdated.
Parameters in financial-crime monitoring systems can be set to alert banks based on details like a company's compliance history, relationships to government officials and unusual transaction volumes. The Deutsche Bank system in question is separate from programs that monitor cash flows in real time, and can delay or block transactions if they are flagged as potentially problematic.
Banking watchdogs in the U.S. and Europe have fined Deutsche Bank for a range of compliance failures. Ongoing investigations are focused on alleged risky transactions involving Russia and other countries.
Additional scrutiny of the bank's compliance practices has intensified from U.S. investigators and congressional Democrats. Two congressional committees are probing the bank's money-laundering controls broadly, along with its ties to President Trump, his campaign and people and entities connected to him. The president's lawyers have sought to block subpoenas issued to Deutsche Bank as part of the probes into him and his family, citing privacy and legal jurisdiction. Mr. Trump has said the Democratic-led investigations aren't impartial.
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(END) Dow Jones Newswires
May 23, 2019 02:47 ET (06:47 GMT)
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