In a bid to ensure high internal operating standards, Germany’s largest lender Deutsche Bank AG DB has decided to review its know-your-client (KYC) and client on-boarding procedures. Notably, the company seeks to achieve increased transparency in these processes, which will, in turn, help it maintain sustainable client relationships in the long run.
The decision to review its processes was announced by the company’s Co-Chief Executive Officer, John Cryan, through a memo issued to the employees on Nov 27.
However, while such reviews will be conducted by the management board, Deutsche has decided to tighten the internal policies with the help of two immediately effective changes. Firstly, the company will suspend the addition of new clients as well as introduction of new products to existing clients in “certain locations that have higher risk weightings”.
Secondly, any transaction with a new client will commence only upon successful completion of the required KYC and on-boarding procedures. Notably, till now, the company had allowed such transactions to begin immediately. Further, this change will be adopted across all business divisions in every location.
Additionally, Jeff Urwin, who heads Deutsche’s corporate and investment banking unit, has been asked by the management board to lead the review.
Notably, earlier in 2015, regulators had accused the bank of involvement in a $6-billion money laundering scam which helped its Russian clients move funds out of the country without notifying authorities. At that time, Deutsche had initiated an investigation at its Russian equity unit, which highlighted misconduct in and weak management of the company’s internal policies.
Moreover, Deutsche’s decision to review its internal policies follows a $109-million fine levied on Barclays PLC BCS by the Financial Conduct Authority. The fine pertains to the bank’s failure to comply with the necessary standard procedures for minimizing the risk of money laundering.
Deutsche currently holds a Zacks Rank #4 (Sell).
Better-ranked foreign bank stocks include Banco Macro S.A. BMA and Grupo Financiero Galicia S.A. GGAL. Both these stocks sport a Zacks Rank #1 (Strong Buy).
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