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UNITED STATES OF AMERICA
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
hlEW YORK STATE BANKING DEPARTMENT
NEW YORK, NEW YORK
Written Agreement by and among
DEUTSCHE BANK TRUST COMPANY
AMERICAS
New York, New York
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Docket No. 05-025-WAIRB-SMB
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and
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NEW YORK STATE BANKING DEPARTMENT )
New York, New York
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FEDERAL =SERVE BANK OF NEW YORK
New York, New York
WHEREAS, Deutsche Bank Trust Company Americas, New York, New York, (the
"Bank"), a New York state chartered bank that is a member of the Federal Reserve System, is
taking steps to address deficiencies relating to its compliance with applicable federal and state
laws, rules, and regulations relating to anti-money laundering ("AMY) policies and procedures,
including the (Zurrency and Foreign Transactions Reporting Act, 3 1 U.SI.C. 5311 et seq., as
amended by the USA PATRIOT Act of 2001 (the Bank Secrecy Act or the "BSA"); the rules and
regulations issued thereunder by the U.S. Department of the Treasury (3; 1 C.F.R. Part 103);
Regulation H of the Board of Governors of the Federal Reserve System (the "Board of
Governors") (12 C.F.R. 208.62 and 208.63); and regulations of the New York State Banking
Department (the "Department") (3 N.Y.C.R.R. Part 300);
WHEREAS, the Bank provides significant correspondent banking services to both U.S.
and non-U.S. banks, and also conducts a high volume of U.S. dollar funtds transfer clearing for
its respondent banks and examiners have identified compliance and risk: management
deficiencies at the Bank in these operational areas;
WHEREAS, the Bank is taking steps to enhance its due diligenc,eand transaction
monitoring policies and :lproceduresrelating to its correspondent banking and funds transfer
clearing activities to ensure effective monitoring of the risks associated with these lines of
business, including legal and reputational risks;
WHEREAS, it is the common goal of the Bank, the Federal Reserve Bank of New York
(the "Reserve Bank") and the Department to ensure that the Bank conti~iuesto fully address the
deficiencies in the Bank's AML policies and procedures, customer due (diligencepractices, risk
management processes, and internal control environment related to the Bank's correspondent
banking and funds transfer clearing activities; and
WHEREAS, on
2005, the board of directors, at a duly constituted
meeting, adopted a resolution authorizing and directing
SETff W f j U 6d
to
enter into this Written Agreement (the "Agreement") on behalf of the Bank, and consenting to
compliance by the Bank, and its institution-affiliated parties, as defined in section 3(u) of the
Federal Deposit Insurance Act, as amended (12 U.S.C. 1813(u)), with eiach and every provision
of this Agreement.
NOW, THEREFORE, the Bank, the Reserve Bank, and the Department hereby agree as
follows:
Management Review
1.
(a)
Within 120 days of this Agreement, the board of directors shall direct and
oversee a review of the duties and responsibilities of the Bank's officers and the staffing
required for an effective control environment for the correspondent banking and funds transfer
clearing business lines. The primary purpose of the review shall be to enhance management's
oversight of the Bank's BSNAML compliance program in these business lines and to ensure
that they are adequately staffed by qualified and trained personnel. The management review
shall, at a minimum, address, consider, and include for its correspondent banking and funds
transfer clearing business lines:
(i)
An assessment of the effectiveness of the Bank's control
infrastructure, corporate governance, organizational structure, and business line accountability,
including reporting lines and duties to be performed by each officer; and
(ili)
a plan to recruit, hire, or appoint, as necessary, additional officers
and staff with the requisite ability, experience, and other qualifications ito competently perform
their assigned duties.
(b)
The board of directors shall forward to the Reserve Bank and the
Department a written report that includes findings and conclusions of its management review,
and a description of specific actions that the board of directors propose:; to take to strengthen the
management and oversight of the Bank's correspondent banking and funds transfer clearing
operations.
Anti-Money ]Laundering Compliance
2.
Within 60 days of this Agreement, the Bank shall submiit to the Reserve Bank and
the Department acceptable written revisions to the provisions of the Balk's BSAIAML program
that cover correspondent banking and funds transfer clearing activities. The provisions shall be
updated on an on-going basis as necessary to incorporate amendments 1.0the BSA and the rules
and regulations issued thereunder. The revised provisions shall, at a milnimum:
(a)
Innprove the Bank's system of internal controls fix correspondent banking
and funds transfer clearing activities to ensure compliance with all recordkeeping and reporting
requirements;
(b)
include controls designed to ensure compliance with all requirements
relating to correspondent accounts for non-U.S. persons, including, but not limited to, the
prohibition on1 correspondent accounts for foreign shell banks (3 1 C.F.FL. 103.177), and special
due diligence requirements for certain correspondent accounts (3 1 C.F.IR. 103.181);
(c)
provide for thorough assessment of legal and replutational risks associated
with correspondent banking and funds transfer clearing activities, and fix regular review of risk
tolerance by appropriate members of senior management of the Bank; and
(d)
provide for the documentation of due diligence performed for respondent
banks.
Independent Testing
3.
W i h n 60 days of this Agreement, the Bank shall submit to the Reserve Bank and
the Department an acceptable written plan for enhancing independent testing of AML
compliance for the Bank's correspondent banking and funds transfer clearing activities. The
plan, at a minimum, shall provide for and include:
(a)
Procedures to assess and evaluate the correspondlent banking and funds
transfer clearing business lines':
(i)
compliance with the BSA, the rules and regulations issued
thereunder, and all other applicable AML and suspicious activity reporting requirements;
(in)
adherence to industry sound practices relating to respondent
account due diligence;
(iii)
implementation of and compliance with witten AML policies and
(iv)
training programs to ensure that appropriate personnel possess the
procedures;
requisite knowledge necessary to comply with the BSA; and
(v)
ongoing compliance monitoring of operations and customer due
diligence, including a schedule of compliance reviews to be performed ]inthose areas;
(b)
the review of independent testing results by senior Bank management and
escalation to the board of directors in appropriate circumstances;
(c)
procedures to ensure that senior Bank management institute appropriate
actions in response to the independent testing results; and
(d)
procedures to ensure that independent testing results are communicated to
the Reserve Bank and the Department on a regular basis and retained for subsequent supervisory
review.
Training
4.
Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and
the Department an acceptable written plan to provide effective training tlo all appropriate Bank
personnel in the correspondent banking and funds transfer clearing operations areas (including,
but not limited1 to, compliance, correspondent account relationship, funds transfer clearing
operations, anti customer contact personnel) in all aspects of regulatory and internal policies and
procedures related to the BSA and the identification and reporting of suspicious transactions, and
to update the training on a regular basis to reasonably ensure that all personnel are trained in the
most current legal requirements and in the Bank's AML risk managemc:nt processes.
Suspicious Activity Reporting and Customer Due Diligence
5.
Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and
the Department an acceptable written customer due diligence program designed to reasonably
ensure the ideintification and timely, accurate, and complete reporting of all known or suspected
violations of law against or involving the Bank and suspicious transacti~onsat the Bank to law
enforcement and supervisory authorities as required by the suspicious reporting provisions of
Regulation H of the Board of Governors (12 C.F.R. 208.62) and 3 N.Y.C.R.R. 300.1. At a
minimum, the program shall include:
(a)
A methodology for assigning risk levels to the Bank's customer base,
including correspondent account holders;
@)
a risk-focused assessment of the Bank's custome~rbase to:
(i)
identify the categories of customers whose transactions and
banking activities are routine and usual; and
(ii)
determine the appropriate level of enhanced due diligence
necessary for those categories of customers that pose a heightened risk of conducting potentially
illicit activities at or through the Bank;
(c)
for correspondent accounts established, maintained, administered, or
managed in the United States for a foreign financial institution, procedures that comport with
industry souncl practices that are set forth in available public guidance (!g.g.the New York
Clearing House Association LLC's "Guidance for Counter Money Laundering Policies and
Procedures in Correspondent Banking" (March 2002) and the Base1 Committee on Banking
Supervision's "Customer Due Diligence for Banks" (October 2001)), aid that include, but are
not limited to:
(i)
obtaining appropriate information about the respondent, its
business operations, markets served, customer base, and its AML procedures, particularly with
regard to its customer relationships that may present a heightened risk o f money laundering; and
(ii)
procedures designed to ensure that correslpondent banking services
provided by the Bank are reviewed and approved by appropriate levels (ofmanagement, and are
subject to appiropriate on-going review;
(d)
procedures designed to ensure proper identification and timely reporting
of all known or suspected violations of law and suspicious transactions, including, but not
limited to:
(i)
effective monitoring of customer accounts and transactions,
including h d s transfer transactions conducted through the Bank's clearing operations,
consistent with industry sound practices;
(ii)
procedures for reviewing potentially suspicious activity, such as
patterns of large U.S. dollar transactions through high risk jurisdictions, and h d s transfers
where transaction volumes and amounts appear inconsistent with any valid business purpose or
where information on transactors, including shell corporations and otheir entities, is unavailable
or apparently inaccurate;
(iii)
appropriate participation by Bank senior management in the
process of identifying, reviewing, and reporting potentially suspicious activity;
(iv)
adequate referral of information about potentially suspicious
activity through appropriate levels of Bank management, including a po~licyfor determining
action to be talken in the event of multiple filings of Suspicious Activity Reports on the same
customer or where a customer fails to provide necessary due diligence information; and
(v)
maintenance of sufficient documentation lby the Bank with respect
to its investigation and analysis of suspicious activity, including the resolution and escalation of
concerns; and
(e)
procedures for determining whether the closure of an account is
warranted; effecting an account closure in a timely manner; and documenting such decision.
Transaction Monitoring System
6.
(a)
Within 45 days of this Agreement, the Bank shall submit to the Reserve
Bank and the Ilepartment an acceptable written plan, including target dates, for the full
installation, testing, and activation of the Bank's proposed new transaction monitoring system.
The plan shall also include a methodology and target date for determining that the transaction
monitoring system is deemed effective.
(b)
Within 60 days of this Agreement, the Bank shall submit to the Reserve
Bank and the Department acceptable policies and procedures for the monitoring of customer
accounts and transactions, including funds transfers conducted through ihe Bank's clearing
operations, that are designed to effectively manage the associated legal iind reputational risks and
ensure compliance with regulatory requirements. The acceptable policies and procedures shall
talke effect upon the determination by internal audit or another competent independent party that
the new transaction monitoring system has been deemed effective.
Interim Transaction Monitoring Procedures
7.
Within 30 days of this Agreement, the Bank shall submiit to the Reserve Bank and
the Department acceptable written interim transaction monitoring proce~duresthat shall remain in
effect until the new transaction monitoring system is deemed effective by internal audit or
another competent independent party. These interim procedures shall be designed to monitor the
Bank's transactions so that it can comply with the suspicious activity reporting requirements of
Regulation H of the Board of Governors (12 C.F.R. 208.62) and 3 N.Y.C.R.R. Part 300.1.
Transaction Review
8.
(a)
Within 20 days of this Agreement, the Bank shalil engage a qualified
independent firm (the "Consultant") acceptable to the Reserve Bank aml the Department to
conduct a review of account and transaction activity for the time period beginning no later than
July 1,2003 through present to detemine whether suspicious activity involving accounts or
transactions at, by or through the Bank was properly identified and reported in accordance with
applicable suspicious activity reporting regulations (the "Review").
(b)
Within 30 days of this Agreement, but prior to the commencement of the
Review, the Bank shall submit to the Reserve Bank and the Department for approval an
engagement letter that sets forth:
(i)
the scope of the Review, including the types of accounts and
transactions to1 be reviewed;
(ii)
the methodology for conducting the Review, including any
sampling procedures to be followed;
(iii)
the expertise and resources to be dedicated to the Review; and
(iv)
the anticipated date of completion of the Review.
(c)
Upon completion of the Review, the Bank shall provide to the Reserve
Bank and the 'Department a copy of the Consultant's report detailing the fmdings of the Review
immediately after the report is received by the Bank.
(d)
Throughout the Review, the Bank shall ensure that all matters or
transactions required to be reported that have not previously been reported are reported in
accordance with applicable rules and regulations.
Approval, Implementation, and Progress Reports
9.
(a)
The Bank shall submit written programs, plans, policies, procedures, and
an engagement letter that are acceptable to the Reserve Bank and the Department within the
applicable time periods set forth paragraphs 2,3,4,5,6,7,
and 8(a) of this Agreement. An
independent consultant acceptable to the Reserve Bank and the Department shall be retained by
the Bank within the time period set forth in paragraph 8(a) of this Agreement. The Bank shall
adopt the approved programs, plans, policies, procedures, and engagement letter within 10 days
of approval by the Reserve Bank and the Department. During the term of this Agreement, the
approved programs, plans, policies, procedures, and engagement letter shall not be amended or
rescinded without the prior written approval of the Reserve Bank and th~eDepartment.
(b)
Upon notice of the Reserve Bank's and the Department's approval, the
Bank shall immediately implement the approved programs, plans, policies, and procedures and
thereafter fully comply with them.
10.
Within 10 days after the end of each month following the date of this Agreement,
the Bank shall submit to the Reserve Bank and the Department written progress reports detailing
the form and manner of all actions taken to secure compliance with the provisions of this
Agreement, and the results thereof. Management's responses to any audit reports covering the
Bank's BSAJAMLmatters prepared by internal and external auditors shall be included with the
progress report. The Reserve Bank and the Department may, in writing, discontinue the
requirement for progress reports or modify the reporting schedule.
Notices
11.
All communications regarding this Agreement shall be sent to:
(a)
Ms. Sarah J. Dahlgren
Senior Vice President
Federal Reserve Bank of New York
33 Liberty Street
New York, NY 10045
(b)
Mr. Michael J. Lesser
Deputy Superintendent
New York State Banking Department
One State Street
New York, NY 10004
(c)
Mr. Seth Waugh
Chairman, President and CEO
Deutsche Bank Trust Company Americas,
60 Wall Street
New York, New York 10005
Miscellaneous
12.
The applicable provisions of this Agreement shall be binding on the Bank, and
each of its institution-affiliated parties in their capacities as such, and their successors and
assigns.
13.
Each provision of this Agreement shall remain effective and enforceable until
stayed, modified, terminated or suspended in writing by the Reserve Bank and the Department.
14.
Notwithstanding any provision of this Agreement, the Reserve Bank and the
Department may, in their sole discretion, grant written extensions of time to the Bank to comply
with any provision of this Agreement.
15.
The provisions of this Agreement shall not bar, estop, or otherwise prevent the
Board of Governors, the Reserve Bank, the Department or any federal or state agency fi-om
taking any further or other action affecting the Bank, or any of its current or former institutionaffiliated parties or their successors or assigns.
16.
This Agreement is a "written agreement" for the purposes of, and is enforceable
by the Board of Governors as an order issued under Section 8 of the Federal Deposit Insurance
Act and by the Department pursuant to Section 39 of the New York State Banking Law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of this
&
day of
m z a ,2005.
DEUTSCHE BANK TRUST
COMPANY AMERIC
FEDERAL RESEFCVE BANK OF
NEW YORK
By:
By:
NEW YORK STA'TE BANKING
DEPARTMENT
Deputy Superintendent