Deutsche Bank settles FCPA action over hiring allegations

Aug 28, 2019
Lender to pay $16 million in resolving SEC enforcement

Deutsche Bank has agreed to pay more than $16 million to settle claims it violated the FCPA through recruitment practices outside the US.

The SEC alleges in its administrative proceeding that the lender between at least 2006 and 2014 gave ‘valuable employment’ to relatives of foreign government officials in various parts of the world as a personal benefit to those officials in order to ‘improperly influence’ them into helping Deutsche Bank get or retain business or other benefits.

For example, the agency says that while Deutsche Bank was working to obtain work on an IPO from a Chinese client, the client’s chair asked Deutsche Bank to hire his son. The banker trying to secure the IPO work told his management that if Deutsche Bank hired the chair’s son, he believed it would be awarded the business, the SEC alleges.

According to the agency, Deutsche Bank was aware that hiring relatives of foreign government officials and other clients in exchange for business could violate anti-bribery laws such as the FCPA. Indeed, the bank in 2010 enacted a written hiring policy in the Asia-Pacific region that was designed to detect and prevent employees from offering temporary employment to candidates referred by current or potential clients, and thereby detect and prevent corrupt hiring practices, the SEC says.

But the commission adds that this regional hiring policy was not effectively enforced and did not apply to all types of recruitment. In addition, Deutsche Bank – although aware of corruption risks in its referral hiring practices – failed to implement global policies to properly address the issue until 2015, the SEC alleges.

Bank employees created false books and records that concealed corrupt hiring practices and failed to accurately document and record certain related expenses, according to the commission. It also alleges that Deutsche Bank failed to create and maintain a system of internal accounting controls around its hiring practices that was able to provide reasonable assurances that its employees did not bribe foreign government officials.

SETTLEMENT
The $16 million payment by the bank comprises $10,785,900 in disgorgement, $2,392,950 in prejudgment interest and a $3 million civil penalty. Deutsche Bank settled without admitting or denying wrongdoing.

SEC officials write that, in deciding to accept this agreement, the commission took into account Deutsche Bank’s co-operation with the agency and its remedial efforts. According to the SEC, the lender co-operated by, among other things:

  • Responding promptly to requests for information and documents
  • Identifying issues and facts that would likely be of interest to SEC officials
  • Providing regular updates of findings from the bank’s internal investigation
  • Identifying key documents and providing factual chronologies to SEC officials.

The agency says Deutsche Bank’s remedial measures included:

  • Enhancements to its internal accounting controls
  • Enhancements to its anti-corruption compliance program and hiring practices globally
  • Requiring that the bank’s anti-corruption office reviews and approves each hire of a candidate referred by a client, potential client or government official
  • Implementing procedures and practices to monitor and audit referral hires
  • Increased anti-bribery training that addresses hiring practices
  • Personnel changes to remediate in the relevant regions and substantially enhanced compliance staffing.

In addition, the bank is continuing to develop policies to mitigate corruption risks in lateral hiring and to ensure its conflicts of interest policy is enforced, the SEC says.

As part of the settlement, Deutsche Bank acknowledges that the commission is not imposing a civil penalty of greater than $3 million due to its co-operation. It also acknowledges that the enforcement division may choose to seek a bigger penalty if it later discovers that the bank knowingly handed over materially false or misleading information or materials.

A Deutsche Bank spokesperson says in a statement: ‘Deutsche Bank provided substantial co-operation to the SEC in its inquiry and has implemented numerous remedial measures to improve the bank’s hiring practices.’

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