The AML Crackdown Continues - DOJ Subpoenas Paypal, Deutsche Bank fined $630 Million


anti-money laundering paypal deutsche bank
Andrea Barnes
Andrea is Communications Manager at FXcompared. Prior to joining FXcompared, she worked as a communications consultant for companies seeking guidance with their social media, marketing and digital… Read more

The anti-money laundering crackdown continues in the financial services world. Previously, banks seemed to be the main target of investigation by authorities, but 2017 has revealed that non-bank financial services are also subject to investigation, with Western Union being fined $586 million in early January. Though individual money transfer agents have been investigated and fined by the authorities, this move marked the first for a major non-bank entity to be held responsible for anti-money laundering violations. The FTC Chairwoman, Edith Ramirez, who commented on the situation, said “Western Union owes a responsibility to American consumers to guard against fraud, but instead the company looked the other way, and its system facilitated scammers and rip-offs."

Ramirez's words indicated that non-bank money transmitters are being held to the same standard as their banking counterparts. Is the investigation into Western Union and subsequent fining the beginning of a larger trend towards investigating non-bank money transfer companies?

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Paypal Receives Subpoena from Department of Justice

Last Wednesday, Paypal announced that it had received subpoenas from the Department of Justice regarding a money-laundering probe. Paypal said it received subpoenas "seeking the production of certain information related to our historical anti-money laundering program" according to a filing with the Security and Exchange Commission (SEC). Paypal indicated that it was cooperating with the authorities at the DOJ, but was unsure what the response by the government will be.

The announcement that the DOJ is now examining Paypal suggests that Western Union may not be the only non-bank money transmitter to be fined for money laundering promotion. In the past, the majority of previous anti-money laundering investigations were limited to individual agents and banks. Will Paypal be fined, and if so, will this mark the beginning of a larger trend towards fining non-bank entities?

The targeting of Paypal is of note, as Paypal does not have agents transferring money at live locations. In the Western Union probe that resulted in $586 million in fines, authorities were specifically investigating money laundering by suspicious agents that Western Union refused to punish. Given that Paypal's money transfers are done almost entirely online, the DOJ's investigation of them suggests they are looking beyond questionable actions by agents. Does this mean it is only a matter of time before authorities investigate some of the many smaller money transfer companies and startups to hit the fintech scene that focus primarily on mobile and online transfers?

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Banks Still Being Investigated: Deutsche Bank Fined Over $630 Million

Although non-banks are beginning to be investigated, the worries are not yet over for traditional banks. At the end of January, it was announced that Deutsche Bank was fined more than $630 million by authorities. The fines are a combination of £163 million by The UK's Financial Conduct Authority and a fine for $425 million by The New York Department of Financial Services, a US regulator.

The Financial Conduct Authority cited Deutsche Bank's failure to prevent the money laundering of $10bn from Russia, while the New York Department of Financial Services cited a lack of resources for Deutsche Bank's compliance department.

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