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US probes Deutsche Bank over Moscow deals

The US Department of Justice is investigating Deutsche Bank over suspicions the bank helped wealthy Russian businessmen close to President Vladimir Putin get their money out of Moscow.

Published: 16 October 2015 10:37 CEST

US probes Deutsche Bank over Moscow deals

Photo: DPA

Bloomberg reports that Germany's biggest bank could have masked as much as $6 billion in transactions which disguised the fact that Russians suffering under US sanctions were furrowing their money into more stable financial markets.

In the so-called mirror trades, Russian businessmen may have bought securities in rubles in Deutsche Bank's Moscow office before selling identical ones in a foreign currency through the London office.

The bank is also conducting an internal review of the transactions, and Bloomberg reports that close associates of Russian President Vladimir Putin were involved in the money flows.

The transactions are said to involve Arkady and Boris Rotenberg, close friends of Putin who got rich on state-owned firms which were sanctioned by the US after Russia annexed Crimea from Ukraine in 2014.

The trades under review took place between 2011 and 2015, Bloomberg reports.

US investigators are looking into whether Deutsche Bank complied with US anti-money laundering laws.

This is just the latest investigation in what has become something of an annus horribilis for the German lender.

In the US the bank is being investigated as part of at least three other criminal investigations, while globally it is mired in as many as 6,000 further litigation cases.

Meanwhile in April it reached and agreement with UK and US authorities to pay a $2.5 billion over manipulating of the Libor rate.

Falling profits also led to the unexpected resignation of co-CEOs Anshu Jain and Jürgen Fitschen in June.

Earlier in October Deutsche Bank issued a warning that it would post losses of €6.2 billion for the third quarter.

The bank also recently downsized its Moscow operations “in order to reduce complexity, costs, risks, and capital consumption.”

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Card over cash? Why Germany is seeing a new payment preference

Germany has long been a very cash-based country, occasionally to the dismay of frustrated tourists at the Döner shop.

A few German phrases express the people’s love of physical money. There’s ‘only cash is true’ – Nur Bares ist Wahres. Or Bargeld lacht, literally meaning cash laughs, but used to imply that cash is what’s wanted, similar to ‘cash is king’ in English.

But the classic German preference for cash appears to be evolving, as the use of girocards is growing, even for small transactions.

How are girocards being used?

Girocard, an ATM and debit card service offered by German Banks, was designed to allow customers to use virtually all German ATMs and, increasingly, to make purchases at businesses.

READ ALSO: Ask an expert – Why is cash still so popular in Germany, and is it changing?

Last year, consumers in Germany used their Girocard more often than ever before for cashless payments. A total of €7.48 billion payment transactions with the plastic card were counted – 11.5 percent more than in the previous record year 2022, according to figures published by the Frankfurt-based institution Euro Card Systems.

Whether at the bakery, petrol station or supermarket, customers are increasingly pulling out their cards at the checkout, even for smaller amounts. As a result, the average amount paid with the Girocard fell from €42.34 to €40.69 within a year.

The rise of card payments in Germany

Contactless payment, which is possible with girocards and credit cards that have an NFC chip, got a boost during the Covid pandemic, as retailers promoted it for hygiene reasons.

But the use of card payments has continued to grow in Germany since then, boosted partly by the increasing use of girocards.

Promoting the use of girocards, some German banks have expanded their cards’ functions: Sparkassen, Volksbanken, or Raiffeisenbanken offer girocards for the digital wallet, for example.

Banks want to continue upgrading the payment card with further applications. For example, a project is being tested which would add an age verification function to girocards that would be useful when a customer is buying cigarettes.

On the retail side, it’s clear why the Girocard is preferred to other debit options.

“We see that debit cards from international providers cost up to four times more,” Ulrich Binnebößel, Head of the Payment Systems & Logistics Department at the German Retail Association (HDE) told DPA.

What’s the difference between the Girocard and other debit?

The Girocard is a strictly German phenomenon. It can be seen as the latest iteration of the EC card, which was created to consolidate payment systems following the unification of former East and West Germany.

In 1991 different debit card systems, including Eurocheque guarantee cards from former West Germany and Geldkarte ATMs from former East Germany, were unified into Eurocheque cards.

Then in 2001, the Eurocheque system was disbanded, but German banks continued to use the EC logo for “electronic cash’” cards, or EC cards. In 2007, the German Banking Industry Committee introduced Girocard as a common name for electronic cash and the German ATM network.

Girocards are only issued and accepted in Germany, so if you want to get one of your own, you’ll have to join a German bank, and shell out those notorious German banking fees.

READ ALSO: Why it’s almost impossible to find a free bank account in Germany

Alternatively, you can get by with internationally accepted debit cards provided by a bank in your home country, or otherwise by joining an app-based European banking service like N26.

But be warned, without the Girocard in hand, at some smaller retailers you may be told, “Leider nur Bargeld oder EC-Karte.”

With reporting by DPA

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