A DUAL SYSTEM OF JUSTICE: FINANCIAL INSTITUTIONS AND WHITE-COLLAR CRIMINAL ENFORCEMENT.

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Author: Sebastian Bellm
Date: May 2021
From: Notre Dame Law Review(Vol. 96, Issue 5)
Publisher: University of Notre Dame Law School
Document Type: Article
Length: 12,792 words
Lexile Measure: 1880L

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INTRODUCTION

In 2013, Deutsche Bank established a relationship with Jeffrey Epstein that was estimated to generate revenues of up to $4 million a year. (1) Seven years later, as a result of its dealings with Mr. Epstein, Deutsche Bank agreed to pay a fine of $150 million. (2) New York state regulators accused the bank of allowing "significant compliance failures" when processing hundreds of transactions for the late financier. (3) Throughout the relationship, regulators asserted that the bank had not properly addressed a plethora of red flags: Mr. Epstein's controversial past and criminal history of sexual misconduct, 120 wire transfers totaling $2.65 million to women with Eastern European surnames, suspicious payments to past coconspirators, (4) and suspiciously large cash withdrawals, including a cash withdrawal of $100,000 for "tips and household expenses." (5) Regulators identified a number of control failures that allowed for Mr. Epstein's assets to be used for criminal misconduct. For example, when setting conditions for monitoring Epstein's activity, bank executives poorly communicated the criteria for flagging suspicious transactions, creating confusion within the internal anti-money laundering division. (6) As a result, "specialists interpreted the guidance to mean that unusual activity should be flagged only if it was unusual for Mr. Epstein--which led to an alert about payments to a Russian model and a Russian publicity agent being dismissed because the transactions were 'normal for this client.'" (7)

At first, one might think that such a hefty fine of $150 million would induce Deutsche Bank to correct these failures. Yet, perhaps surprisingly, such fines are not uncommon for the bank. (8) Deutsche Bank, "a symbol of corporate recidivism[,]... has paid more than $9 billion in fines since 2008 related to a litany of alleged and admitted financial crimes." (9) In 2016 alone, Deutsche Bank was involved in 7800 different legal disputes, with an estimated litigation reserve of $5.7 billion. (10) Since the relationship between Deutsche Bank and Mr. Epstein began in 2013, the bank agreed to pay the following: $2.5 billion in fines for its involvement in the 2002 LIBOR scandal; (11) $7.2 billion in a settlement over its role in the 2008 financial crisis; (12) $258 million for doing business with Libya, Myanmar, Sudan, Iran, and Syria in violation of U.S. economic sanctions; (13) $425 million for its role in laundering $10 billion out of Russia; (14) and $7.5 million to settle charges of improperly handling "pre-released" American depository receipts. (15)

The relationship between Deutsche Bank and Jeffrey Epstein exemplifies a pattern as old as white-collar crime itself, in which an organization found to have violated the rules designed to protect the public agrees to pay a considerable fine for its wrongdoing. However, Deutsche Bank, like almost all large international banks, is a public corporation. This means that when these fines are levied against the bank, the burden ultimately falls on the corporation's public shareholders, rather than falling on the individuals responsible for breaking the law. As of June 30, 2020, the approximate date of the Epstein fine, Deutsche...

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Gale Document Number: GALE|A666682358