In March Deutsche Bank relocated the command of its compliance effort from Stuart Lewis, its chief risk officer in London, to Stefan Simon, its Chief Administrative Officer, in Frankfurt. On 1st July it will complete its reorganisation with a special eye on combating financial crime more effectively.
As a result of the relocation in March, Simon is now in charge of six units: (i) the Anti-Financial Crime team (AFC), (ii) Compliance and the Business Selection and Conflicts Office (BSCO), (iii) Legal, (iv) Regulatory Affairs, (v) the Chief Remediation Office (CRemO) and (vi) the Chief Operating Office (COO).
According to an internal memorandum that Compliance Matters has seen, "four areas will gain more clout" in Deutsche Bank's new structure on 1st July: risk assessment, controls testing and assurance (which the group describes as its "internal quality assurance" effort), transaction monitoring and the development of scenarios for monitoring. This, it hopes, will beef up its efforts against financial crime.
Brickbats and catcalls
The memorandum neglects to explain the exact nature of "gaining clout," but it does say that an unidentified project management office - perhaps the bank's only one, perhaps not - will now receive a global remit as the Chief Remediation Office (CRemO), "remediation" being code language for putting things right after a fine. The memo states that this office "steered us successfully through the monitoring processes in the US in 2020," which might be a reference to internal reforms that might have had to follow Deutsche's US$16-million fine in August 2019 to settle charges that it contravened the Foreign Corrupt Practices Act 1977 by hiring relatives of foreign government officials in order to influence them improperly in connection with investment banking business. Deutsche made no admission or denial.
In January the SEC and Department of Justice also induced Deutsche Bank to pay more than $120 million, which included more than $43 million to settle charges in respect of the FCPA. The cease-and-desist order states that it had already "remediated" various things, presumably in 2020 through its project management office, and accused it of having engaged foreign officials, their relatives, and their associates as third-party intermediaries, business development consultants and finders to obtain and retain business all over the world.
Pausing to note that "we are still not meeting all the demands of the regulators," the memo announces further changes.
- Controls Testing & Assurance, with its quality assurance remit for the Chief Administrative Office, will become an independent function that will report directly to Simon.
- Deutsche will move central functions such as AFC and compliance to Frankfurt.
- AFC and compliance will both be subjected to some so-called common organisational principles, which will simplify their structure.
- All parts of the Chief Operating Office, which now resides in the Chief Administrative Office, "will be merged into a single COO function."
In a brief moment of self-pity, the memorandum reflects on the onerous demands of various - mostly American - regulators: "we are not the only ones to encounter the great complexity involved in fighting financial crime; it poses a challenge for the entire sector."