Bloomberg has on an ongoing internal investigation by Deutsche Bank, which has thus far found upwards of $4 billion in "suspicious trades" and an additional $6 billion in mirror trades, all connected with the bank's Russian concerns. Some details:
The mirror trades, as described in a Russian central bank earlier this year on Deutsche Bank, involved clients buying Russian shares for rubles in Moscow and simultaneously selling them in London, usually for dollars, according to people familiar with the central bank’s findings.
That sort of trade, while legal in some circumstances, can also be used to skirt U.S. rules on reporting large international movements of money.
Assets in some of the accounts under review at Deutsche Bank were believed to belong to close associates of Russian President Vladimir Putin, people familiar with the matter have said. These associates include a relative of the president and two of his longtime friends, Arkady and Boris Rotenberg, the people said.
Russia's central bank has slapped a derisory $5,000 fine on Deutsche Bank. Bloomberg, however, in August that U.S. prosecutors had launched an investigation, currently ongoing, into the mirror trades. Worried about Western prosecution, the bank has set over $1 billion aside in "litigation reserves," even as it investigates itself to figure out just how much it has run afoul of the law. It has closed its Moscow branch in recent months, supposedly to "simplify operations," and is now finally cutting back its Russia business as a whole.
In case it wasn't yet fully apparent, this story underscores just how immense the scale of theft and fraud in Putin’s kleptocracy actually is. And these are not victimless crimes—far from it. The most powerful Russians are squeezing ordinary people dry. Despite the talk of Russian values and Russian nationalism, this regime is just as coldly indifferent as any Soviet commissar or Tsarist noble to the well-being of the average Russian citizen.
And make no mistake, significant Western institutions have been corrupted by their close contacts with this sordid mafia operation disguised as a government. It is safe to apply the iceberg rule to this phenomenon: What we see is only a very small percentage of what is going on. If even a prime German bank and flagship company like Deutsche Bank is vulnerable to the sleazy temptations offered by Russian money, what do we think is happening across much of Europe?
The contrast between the moralistic lectures, finger-wagging, and ostentatious dedication to high values that mark the rhetoric of the European Union on the one hand, and the sleazy indifference to corruption that characterizes much of the shadowy transactions of European elites on the other, isn't remarked upon often enough. That and Deutsche Bank should be caught in such open acts of deception and fraud provides a window into the way the supposedly squeaky-clean German economy operates. What, then, do people think corporate governance might look like in Italy, Belgium, France, and Spain? Romania and Bulgaria? Cyprus and Greece?
Some progress is being made in fighting corruption globally. U.S. prosecutors are making Herculean efforts to clean up international banking—much as they are trying to clean up It is getting harder for the Putinistas to launder their money, and that's a very good thing. More, please. And faster.
But foreign prosecutions alone won’t be able to get the job done. The decline in the willingness of large German companies to observe basic standards of business ethics, and what is clearly a collapse of individual morality, point toward a more profoundly spiritual crisis, rather than merely an institutional one. Yes, regulators missed some dubious transactions. But the more important fact is that so many people were willing to sacrifice their personal integrity to participate in ugly and illegal schemes. It is not just that these people aren’t afraid of the regulators; they aren’t afraid of the consequences of breaking the moral law. When a country's elite becomes so arrogant and so shortsighted that morality doesn't matter to them anymore, bad things are coming. And instead of feeling smug about Europe's challenges in this respect, Americans need to take a long, hard look in the mirror. We are losing touch with the values on which our national success depends.