A shocking report from the prestigious German magazine Der Spiegel sheds new light on Deutsche Bank, where investigations into currency market transactions have led to accusations of cheating and money laundering. The bank, which is considered one of the largest banks in Europe by assets and revenue, has been repeatedly caught out in the past decade conducting money laundering activities that helped it dodge millions of dollars in taxes. These schemes have cost clients in other countries millions of dollars in tax payments, paying over the years in penalty charges for illegal transactions. One method the bank used was the so-called “miracle transaction,” in which it allowed clients to use just a small amount of cash to avert billions of dollars of tax payments. The scandal ultimately cost the bank its longtime CEO and managing director, Robert Fuld, and its president, Rex Charteris, as well as numerous other senior bankers and other executives.
In the wake of the scandal, however, some former clients of the bank are suing it, asking for damages for their role in facilitating the Malaysian fund scandal. This suit, brought by attorneys representing the International Association of Accountants, or IAAAC, highlights the bank’s lax culture when it comes to monitoring client accounts. Isaac’s lawsuit targets five current clients of the bank, who say they lost money through the accounts, and have not been able to recoup any money. The bank claims it has done all it can do to ensure all funds were well-maintained. Its defense strategy says these clients simply didn’t care about how the funds were used.
One of the most damaging pieces of evidence against the bank concerns a confidential memo that Fuld sent to employees in March 2021. The memo, obtained by the German newspaper Die Welt, referred to the state of affairs regarding the bank’s accounts in Malaysia. According to Fuld’s memo, the bank manager had ordered a review of its transactions in Malaysia, saying he needed “a fresh look” at the way the bank handled its account transactions there. The bank manager apparently told his employees that they were not required to check accounts held by customers if they did not need to do so. He wrote that the accounts’ access is only limited to that person who needs to know about them.
A similar sentiment was expressed by Fuld himself. “If you are not involved in the transaction and have no access to the account, you don’t have to check it,” he told employees. However, two months later, one of the employees whose duties it was to check on the bank’s accounts in Malaysia got wind that his superiors hadn’t limited his access to the funds. As soon as this discovery was made, the funds began to go missing from the bank.
This led to more employees finding out about illicit actions that Fuld was involved in. By the end of July, seven workers had come forward and lodged complaints with the bank. Soon afterward, another group of workers came forward with similar complaints against Fuld. These claims were largely based on the fact that a former employee had received a large sum of cash from the bank using funds meant for his family. From this point on, the entire fund had come under suspicion.
Adding insult to injury, the next month, news leaked that the head of the bank’s Middle East operations, hananaeh Kamsah, had abruptly quit. He had been brought into the job as a result of Fuld’s shady promotion. Kamsah was said to be in the middle of the scandal because the funds had been supposed to be used to pay off debts owed by the bank to various Middle Eastern nations. Instead, it has become one of the biggest scandals in Malaysian business history.
According to reports, Fuld has stood accused of embezzling millions of dollars meant for the payment of back debts by the fund. The money went into his own accounts and one of the largest banks in Europe. While Fuld has denied any wrongdoing on his part, Malaysian regulators have launched their own investigation into the bank. Several other banks have also reportedly frozen all of their remaining funds due to the scandal. With financial institutions all closed, the economy of Malaysia will take a huge hit.
In fact, the scandal is so large, that even the Chinese government has issued statements about their involvement in the money-laundering. Meanwhile, hundreds of employees of the bank have faced disciplinary actions, some of which include termination from their jobs. All in all, the fund has lost its reputation and will take a major hit to its credit rating, already damaged by the currency crisis. As these losses continue to mount, many are calling for the resignation of the prime minister.
