Deutsche Bank Staff Saw Suspicious Activity in Trump and Kushner Accounts
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By David Enrich
JACKSONVILLE,
Fla. — Anti-money-laundering specialists at Deutsche Bank recommended in
2016 and 2017 that multiple transactions involving legal entities
controlled by Donald J. Trump and his son-in-law, Jared Kushner, be
reported to a federal financial-crimes watchdog.
The
transactions, some of which involved Mr. Trump’s now-defunct
foundation, set off alerts in a computer system designed to detect
illicit activity, according to five current and former bank employees.
Compliance staff members who then reviewed the transactions prepared
so-called suspicious activity reports that they believed should be sent
to a unit of the Treasury Department that polices financial crimes.
But
executives at Deutsche Bank, which has lent billions of dollars to the
Trump and Kushner companies, rejected their employees’ advice. The
reports were never filed with the government.
The
nature of the transactions was not clear. At least some of them
involved money flowing back and forth with overseas entities or
individuals, which bank employees considered suspicious.
Real estate developers like Mr. Trump
and Mr. Kushner sometimes do large, all-cash deals, including with
people outside the United States, any of which can prompt anti-money
laundering reviews. The red flags raised by employees do not necessarily
mean the transactions were improper. Banks sometimes opt not to file
suspicious activity reports if they conclude their employees’ concerns
are unwarranted.
But former Deutsche
Bank employees said the decision not to report the Trump and Kushner
transactions reflected the bank’s generally lax approach to money
laundering laws. The employees — most of whom spoke on the condition of
anonymity to preserve their ability to work in the industry — said it
was part of a pattern of the bank’s executives rejecting valid reports
to protect relationships with lucrative clients.
Ms. McFadden said she was terminated last year after she raised concerns about the bank’s practices. Since then, she has filed complaints with the Securities and Exchange Commission and other regulators about the bank’s anti-money-laundering enforcement.
Kerrie McHugh, a
Deutsche Bank spokeswoman, said the company had intensified its efforts
to combat financial crime. An effective anti-money laundering program,
she said, “requires sophisticated transaction screening technology as
well as a trained group of individuals who can analyze the alerts
generated by that technology both thoroughly and efficiently.”
“At
no time was an investigator prevented from escalating activity
identified as potentially suspicious,” she added. “Furthermore, the
suggestion that anyone was reassigned or fired in an effort to quash
concerns relating to any client is categorically false.”
Amanda
Miller, a spokeswoman for the Trump Organization, the umbrella company
for the Trump family’s many business interests, said: “We have no
knowledge of any ‘flagged’ transactions with Deutsche Bank.” She said
the Trump Organization currently has “no operating accounts with
Deutsche Bank.” She did not respond when asked if other Trump entities
had accounts.
Karen Zabarsky, a
spokeswoman for Kushner Companies, said: “Any allegations regarding
Deutsche Bank’s relationship with Kushner Companies which involved money
laundering is completely made up and totally false. The New York Times
continues to create dots that just don’t connect.”
Deutsche Bank’s decision not to report the transactions is the latest twist in Mr. Trump’s long, complicated relationship with the German bank — the only mainstream financial institution consistently willing to do business with the real estate developer.
Congressional and state authorities are investigating that relationship and have demanded the bank’s records
related to the president, his family and their companies. Subpoenas
from two House committees seek, among other things, documents related to
any suspicious activities detected in Mr. Trump’s personal and business
bank accounts since 2010, according to a copy of a subpoena included in
a federal court filing.
Mr. Trump and his family sued Deutsche Bank in April, seeking to block it from complying with the congressional subpoenas. The president’s lawyers described the subpoenas as politically motivated.
Suspicious
activity reports are at the heart of the federal government’s efforts to
identify criminal activity like money laundering and sanctions
violations. But government regulations give banks leeway in selecting
which transactions to report to the Treasury Department’s Financial
Crimes Enforcement Network.
Lenders
typically use a layered approach to detect improper activity. The first
step is filtering thousands of transactions using computer programs,
which send the ones considered potentially suspicious to midlevel
employees for a detailed review. Those employees can decide whether to
draft a suspicious activity report, but a final ruling on whether to
submit it to the Treasury Department is often made by more senior
managers.
In the summer of 2016,
Deutsche Bank’s software flagged a series of transactions involving the
real estate company of Mr. Kushner, now a senior White House adviser.
Ms.
McFadden, a longtime anti-money laundering specialist in Deutsche
Bank’s Jacksonville office, said she had reviewed the transactions and
found that money had moved from Kushner Companies to Russian
individuals. She concluded that the transactions should be reported to
the government — in part because federal regulators had ordered Deutsche
Bank, which had been caught laundering billions of dollars for
Russians, to toughen its scrutiny of potentially illegal transactions.
Ms. McFadden drafted a suspicious activity report and compiled a small bundle of documents to back up her decision.
Typically,
such a report would be reviewed by a team of anti-money laundering
experts who are independent of the business line in which the
transactions originated — in this case, the private-banking division —
according to Ms. McFadden and two former Deutsche Bank managers.
That
did not happen with this report. It went to managers in New York who
were part of the private bank, which caters to the ultrawealthy. They
felt Ms. McFadden’s concerns were unfounded and opted not to submit the
report to the government, the employees said.
Ms.
McFadden and some of her colleagues said they believed the report had
been killed to maintain the private-banking division’s strong
relationship with Mr. Kushner.
After
Mr. Trump became president, transactions involving him and his companies
were reviewed by an anti-financial crime team at the bank called the
Special Investigations Unit. That team, based in Jacksonville, produced
multiple suspicious activity reports involving different entities that
Mr. Trump owned or controlled, according to three former Deutsche Bank
employees who saw the reports in an internal computer system.
Some of those reports involved Mr. Trump’s limited liability companies. At least one was related to transactions involving the Donald J. Trump Foundation, two employees said.
Deutsche
Bank ultimately chose not to file those suspicious activity reports
with the Treasury Department, either, according to three former
employees. They said it was unusual for the bank to reject a series of
reports involving the same high-profile client.
Mr.
Trump’s relationship with Deutsche Bank spans two decades. During a
period when most Wall Street banks had stopped doing business with him
after his repeated defaults, Deutsche Bank lent Mr. Trump and his
companies a total of more than $2.5 billion. Projects financed through
the private-banking division include Mr. Trump’s Doral golf resort near
Miami and his transformation of Washington’s Old Post Office Building
into a luxury hotel.
When
he became president, he owed Deutsche Bank well over $300 million. That
made the German institution Mr. Trump’s biggest creditor — and put the
bank in a bind.
Senior executives
worried that if they took a tough stance with Mr. Trump’s accounts — for
example, by demanding payment of a delinquent loan — they could provoke
the president’s wrath. On the other hand, if they didn’t do anything,
the bank could be perceived as cutting a lucrative break for Mr. Trump,
whose administration wields regulatory and law enforcement power over
the bank.
In the past few years,
United States and European authorities have punished Deutsche Bank for
helping clients, including wealthy Russians, launder funds and for
moving money into countries like Iran in violation of American
sanctions. The bank has paid hundreds of millions of dollars in
penalties and is operating under a Federal Reserve order that requires
it to do more to stop illicit activities.
Employees in Deutsche Bank’s offices in Jacksonville, Fla., vet transactions for compliance with anti-money laundering laws.CreditWillie J. Allen Jr. for The New York Times
On
two palm-tree-lined campuses in Jacksonville, Deutsche Bank has
thousands of employees who vet customers and transactions. Six current
and former bank employees there said the operations were deeply
troubled.
Anti-money laundering
workers were pressured to quickly sift through transactions to assess
whether they were suspicious, the employees said. As a result, they
often erred on the side of not flagging transactions.
Two
former employees said that they had raised concerns about transactions
involving companies linked to prominent Russians, but that managers had
told them not to file suspicious activity reports. The employees were
under the impression that the bank did not want to upset important
clients.
Several
employees said they had complained about the bank’s anti-money
laundering processes to Joshua Blazer, the head of Deutsche Bank’s
financial crimes investigations division in Jacksonville, and had then
been criticized for having a negative attitude. One employee said she
resigned last summer over concerns about the bank’s ethics.
Mr. Blazer, hired by Deutsche Bank in 2017 to strengthen the bank’s financial crime-fighting apparatus, declined to comment.
Ms.
McFadden’s job at Deutsche Bank was to inspect clients and transactions
in the company’s private-banking division — the unit that lent money to
Mr. Trump. She joined the bank in 2008, after working for Bank of
America, also in Jacksonville.
Ms.
McFadden had left Bank of America in 2005, and later sued for racial
discrimination and wrongful termination. According to court records, her
lawsuit was settled on confidential terms the same year she joined
Deutsche Bank, where she went on to win multiple performance awards.
Around
the time she flagged the Kushner Companies’ transactions, Ms. McFadden
said, she also complained about how the bank was scrutinizing the
accounts of high-profile customers, such as those in public office.
Those customers — known as politically exposed persons — are regarded as
at heightened risk of being involved in corruption. As a result, their
accounts are subject to extra vetting.
Ms.
McFadden said she had told her superiors that dozens of politically
exposed clients of the private-banking division, including Mr. Trump and
members of his family, were not receiving that added attention. Her
superiors told her to stop raising questions, according to Ms. McFadden
and the two former managers.
After
taking her complaint to the human resources department, Ms. McFadden was
transferred to another division. She was terminated in April 2018. The
bank told her that she was not processing enough transactions.
Ms.
McFadden disputed that. She said her superiors had reduced the number
of transactions she was assigned to review after she voiced her
concerns. She and the two former managers said they perceived her
termination as an act of retaliation.
“They attempted to try to silence me,” she said. “I’m at peace because I know that I did the right thing.”
Follow David Enrich on Twitter: @davidenrich.
Kitty Bennett and Susan C. Beachy contributed research.
Kitty Bennett and Susan C. Beachy contributed research.
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