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Wednesday 1 October 2014

US in sanctions talks with Commerzbank and Deutsche: source

Published 08/07/2014 | 11:43

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Deutsche Bank headquarters in Frankfurt
Deutsche Bank headquarters in Frankfurt

US authorities have begun settlement talks with Germany's Commerzbank and Deutsche Bank over their dealings with countries blacklisted by the United States, extending a crackdown on European banks at a delicate point in U.S.-German relations.

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The talks with state and federal authorities have just begun, a source with direct knowledge of the regulatory investigations told Reuters, and the timing of a deal is unclear.

Deutsche Bank (DBKGn.DE) and Commerzbank (CBKG.DE) declined to comment.

Washington has come down hard on European banks which have evaded their sanctions, imposing a record fine on France's BNP Paribas (BNPP.PA) last week and stoking resentment among bankers and officials at what they see as U.S. imperialism.

Commerzbank, Germany's second-largest lender, is 17 percent owned by the German government and the settlement talks could further strain ties between Berlin and Washington, already at a low ebb due to allegations a German man had worked as a double agent for U.S. intelligence.

Commerzbank is accused by U.S. authorities of transferring money through its U.S. operations on behalf of companies in Iran and Sudan and could pay at least $500 million in penalties, according to the New York Times.

The newspaper, which first reported the settlement talks, said a deal could be struck as soon as this summer and could pave the way for an agreement with Deutsche Bank. (nyti.ms/1xJyjeA)

Commerzbank would likely face a so-called deferred prosecution agreement that would suspend criminal charges in exchange for the financial penalty and other concessions, the report said.

The risk of a fresh wave of U.S. fines weighed on European stock markets with Commerzbank down 3.5 percent and Deutsche 0.5 percent weaker.

Reuters reported last week that Deutsche Bank, Banamex USA, the U.S. arm of Citigroup Inc's (C.N) Mexican banking group Banamex, and two major French banks - Credit Agricole (CAGR.PA) and Societe Generale (SOGN.PA), are among those being investigated by U.S. authorities for possible money laundering or sanctions violations.

Investigations into the two French banks are not expected to be completed until after a settlement with Commerzbank, the source told Reuters.

FINES

After failing to land high-profile criminal cases stemming from the 2008-09 financial crisis, U.S. authorities have focused on other types of criminal activity within the financial industry, including money laundering, tax evasion and sanctions violations.

Last week, France's largest bank BNP Paribas pleaded guilty to two criminal charges, agreed to pay $8.9 billion and have its right to clear certain dollar transactions suspended in order to resolve accusations it violated U.S. sanctions against Sudan, Cuba and Iran.

The size of the fine, the highest ever imposed for sanctions violations, and the suspension have caused concern in Europe and Asia that U.S. authorities are exploiting the dominance of the U.S. dollar to impose their own rules and standards on foreign firms and jurisdictions.

Reuters could not immediately reach the authorities conducting the investigations - U.S. Department of Justice, New York State's banking regulator and the Manhattan district attorney's office.

Commerzbank had 934 million euros ($1.27 billion) at the end of 2013 as provision for litigation risks, including a possible U.S. probe into whether the bank breached sanctions.

Numerous other banks, including Standard Chartered (STAN.L), Lloyds Banking Group (LLOY.L) and Credit Suisse Group (CSGN.VX) have previously settled with U.S. authorities over allegations they violated sanctions but their fines pale in comparison to the near $9 billion penalty imposed on BNP Paribas.

U.S. authorities said the size of the BNP fine reflected the extent of the wrongdoing. BNP employees concealed more than $190 billion in transactions between 2002 and 2012 for companies, governments and people in Sudan, Iran and Cuba.

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