Some close friends of Russian President Vladimir Putin may be among the beneficiaries from the Deutsche Bank trades under investigation by U.S. prosecutors, according to Bloomberg based on information from people familiar with the situation.
According to the sources, the U.S. Department of Justice is investigating whether Deutsche Bank properly examined as much as $6 billion transactions, which may have concealed the flow of money out of Russia.
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The U.S. prosecutors want to determine if Deutsche Bank violated the country’s banking laws and failed to follow the anti-money laundering reporting practices.
Deutsche Bank is also reviewing the accounts connected to approximately a dozen of entities for which the German bank performed the so-called mirror trades between Moscow and London.
In a statement, the German bank said it is “investigating the circumstances around equity trades entered into by certain clients with Deutsche Bank in Moscow and London that offset one another.” According to Deutsche Bank, regulators and law-enforcement authorities in jurisdictions including Germany, Russia, the United Kingdom and the United States were already informed about its review on the issue.
In a mirror trade, a client can buy securities in rubles through Deutsche Bank in Russia and then sell identical securities for foreign currency through the bank’s office in London. Industry officials said banks normally conduct such transaction legally on behalf of clients including mutual funds.
However, Russian could use the mirror trade to convert rubble to foreign currency and wire the money overseas. Such transaction facilitates capital flight and sidesteps money-laundering rules.
Putin allies deny involvement in the Deutsche Bank trades
People familiar with the situation said the assets on those accounts in some cases belong to a relative and two close associates of Pres. Putin. The sources identified some of them as Arkady and Boris Rotenberg, long-time friends of the Russian President. Both became rich from contracts with state-controlled corporations. The Rotenberg’s are among those sanctioned by the U.S. government.
Deutsche Bank said it was informing the European and U.S. regulators regarding the findings of its review of the accounts. The German bank did not provide specific details regarding its review.
The Rotenberg’s denied any involvement in such transactions while a spokesman for the Russian government declined to comment on the issue and described it as unsubstantiated allegations, according to Bloomberg.
In a text message to Bloomberg, Russian Presidential spokesman Dmitry Peskov said, “No one has seen any serious information on this that can be attributed to any serious source.”
Russian top officials concerned about the investigation
A senior Russian official said Pres. Putin is aware of the U.S. investigation into Deutsche Bank and the allegations regarding the involvement of the Rotenbergs in the mirror trades.
The top officials in Russia are concerned that the issue could ignite controversy similar to the one surrounding the accounts of Russians Bank of New York more than 15 years ago, according to the person.
Pres. Putin has been urging Russians to invest in the country and repatriate billions of dollars held offshore. The allegations that his close allies are trying to get their cash out of the country is an opposition to the President’s call.