Payments to his alleged co-conspirators. Money wired to Russian models. A cash withdrawal of $100,000 for “tips and household expenses.”
When Jeffrey Epstein moved his money, Deutsche Bank didn’t ask many questions.
In a $150 million settlement to be announced on Tuesday, the New York Department of Financial Services said that Mr. Epstein, a convicted sex offender, engaged in suspicious transactions for years, even though Deutsche Bank had deemed him a “high risk” client from the moment he became a customer in summer 2013.
“Despite knowing Mr. Epstein’s terrible criminal history, the bank inexcusably failed to detect or prevent millions of dollars of suspicious transactions,” Linda A. Lacewell, the department’s superintendent, said in a statement.
A year and a day after Mr. Epstein was arrested on federal sex-trafficking charges, the settlement described how bank employees relied on informal meetings and institutional momentum to allow suspicious activity to proceed largely unchecked. Instead of performing appropriate due diligence on Mr. Epstein and the activity in his accounts, regulators wrote, the bank was focused on his potential to “generate millions of dollars of revenue as well as leads for other lucrative clients.”
According to the settlement, the bank had “provided exemplary cooperation in these and related matters” and had cut ties with other high-risk clients.
The settlement — the first regulatory action taken against a financial institution in connection with Mr. Epstein — provides a glimpse into the mysterious finances of the self-described tax guru and financial adviser.
According to regulators, Mr. Epstein, who died in a jail cell in New York last year of suicide while awaiting trial, sent $2.65 million in 120 wire transfers through accounts established in the name of an entity called the Butterfly Trust. Some of those payments — as well as money from other accounts — went to three people who had been named as co-conspirators in suits by Mr. Epstein’s accusers that were related to his 2008 guilty plea to prostitution charges in Florida.
Regulators did not name the co-conspirators in the settlement document. The settlement, citing published reports over those suits, describes the first two as having invoked their Fifth Amendment rights and the third as having been accused of recruiting girls for Mr. Epstein.
Four women were named as potential co-conspirators in the nonprosecution agreement Mr. Epstein reached with federal prosecutors that led to his plea to state charges in 2008. Another woman — Ghislaine Maxwell, a longtime confidante and business associate of Mr. Epstein — was charged last week by federal prosecutors in Manhattan with helping him recruit and groom teenage girls he abused at his lavish residences in New York, Florida and New Mexico.
Upon his death, Mr. Epstein left behind an estate valued at more than $600 million that is the subject of litigation by the attorney general of the United States Virgin Islands, where Mr. Epstein had lived and worked for nearly two decades. The attorney general, Denise George, has sued the estate, alleging that a company Mr. Epstein established there, Southern Trust Company, was a sham operation that Mr. Epstein used to mislead the territory and receive a lucrative tax break.
It was Southern Trust — and a similarly named subsidiary, Southern Financial — that opened the first of Mr. Epstein’s accounts with Deutsche Bank in 2013. Over the next five years, Mr. Epstein, his related entities and his associates opened more than 40 accounts with the bank, the settlement said.
Over the years, activities in those accounts were repeatedly questioned by Deutsche Bank employees, who were overruled by their superiors.
According to the settlement, an unnamed executive emailed the manager in charge of the relationship with Mr. Epstein in 2013, before any accounts were opened. The executive said he had spoken to two other top bank officials and neither had suggested that a relationship with Mr. Epstein required a risk review, and could move forward. In later years, bank officials frequently pointed to that email as a reason to keep him as a client, the settlement said.
In 2015, after a specialist in the anti-money-laundering department raised concerns about the bank’s continued relationship with Mr. Epstein, a department manager and the executive who wrote the email two years earlier met with Mr. Epstein at his Manhattan townhouse to discuss new allegations of abuse contained in civil suits. The settlement said bank officials “appeared to be satisfied by Mr. Epstein’s response” and the relationship continued.
And when the bank later set conditions for monitoring Mr. Epstein’s activity, the settlement said, they were poorly communicated, creating confusion. Anti-money-laundering specialists interpreted the guidance to mean that unusual activity should be flagged only if it was unusual for Mr. Epstein — which led to an alert about payments to a Russian model and a Russian publicity agent being dismissed because the transactions were “normal for this client,” according to an email cited in the settlement.
At the end of 2018 — after The Miami Herald published details of Mr. Epstein’s nonprosecution agreement with federal prosecutors from a decade earlier — the bank decided it could no longer keep Mr. Epstein as a client. But an unnamed bank employee who managed the institution’s relationship with him still drafted reference letters to send to other banks, on Deutsche Bank letterhead, according to the settlement.
“Banks are the first line of defense with respect to preventing the facilitation of crime through the financial system, and it is fundamental that banks tailor the monitoring of their customers’ activity based upon the types of risk that are posed by a particular customer,” said Ms. Lacewell, the regulator’s superintendent.
The settlement on Tuesday also covered compliance failures unrelated to Mr. Epstein. The department found that Deutsche Bank had not properly monitored transactions with Danske Bank Estonia and FBME Bank, a Tanzanian institution. As part of the agreement, Deutsche Bank promised to continue its work with an independent monitor — in place since 2017 — to improve its compliance systems.
The settlement is just the latest punishment Deutsche Bank has faced for violating anti-money-laundering laws and rules. Federal and state regulators, as well as the British authorities, have punished the German bank for failing to stop Russian money laundering. In 2015, Deutsche Bank agreed to pay $2.5 billion in penalties to settle accusations that it had manipulated the London interbank offered rate, or Libor.
Deutsche Bank has also attracted scrutiny for its relationship with President Trump and his family. It has been the long-running lender for Mr. Trump and has been the target of subpoenas from congressional investigators and state prosecutors.
Some of the payments Mr. Epstein made from his Deutsche Bank accounts were “inherently suspicious,” regulators wrote. Those included multiple settlement payments totaling more than $7 million and payments totaling more than $6 million for what regulators said appeared to be legal expenses for himself and for people the settlement identified as co-conspirators.
Other transactions — even if harmless — should have raised alarms, regulators wrote.
One of Mr. Epstein’s personal lawyers made $800,000 in withdrawals for Mr. Epstein over a four-year period. Regulators said the bank never got a good explanation for those withdrawals, except that Mr. Epstein needed the money for travel, expenses and paying tips.
According to the settlement, the unnamed lawyer twice asked bank officials how much money could be withdrawn without triggering some kind of alert. Suspicious that he was attempting to circumvent federal regulations that require cash transactions of $10,000 or more to be reported to the government, bank employees spoke to the lawyer.
The settlement said the lawyer denied trying to avoid such a report, and bank officials allowed him to continue making withdrawals on Mr. Epstein’s behalf — including taking out $100,000 at a branch on Park Avenue, not far from Mr. Epstein’s townhouse.
David Enrich contributed reporting.