In a recent statement, German financial watchdog BaFin announced that it had ordered Deutsche Bank to take specific measures to prevent money laundering and terrorism financing or risk facing fines.
BaFin and other watchdogs, including the US Federal Reserve, have repeatedly criticized the lender for deficiencies. Deutsche has been spending billions of euros in a campaign spanning several years to fill the persistent holes in its controls. According to a Bloomberg report, its chief executive officer’s decision last year to once again step up investment on the issue was a key reason why the bank has missed several cost targets.
“We are fully aligned with BaFin on the necessary measures and have already completed a large proportion of them,” a Deutsche Bank spokesman said. “We have, and will continue, to invest the resources and management attention necessary to improve our control environment and to meet regulatory expectations.”
In our recent Deeper Dive, The Costs of Misconduct, we discussed the difference between mis-conduct and poor-conduct. While much media coverage focuses on blatant rule-breaking and misconduct, many regulatory actions, such as those aimed at Deutsche, seek to address instances of poor conduct. If firms hope to manage culture and conduct risks effectively, understanding this distinction, along with the causes and possible solutions, will be essential.