Role of banks in money laundering
What is mirror trades and do you think this technique can be applicable in Albanian banking
system
What are the difficulties for policy makers and law enforcement agencies to deal and better
monitor money laundering?
Elaborate on the role of Deutsche Bank to the 2008 financial crises and what does it indicate in
terms of the credibility of banks
Money laundering is a technique used by criminals—from mobsters, drug traffickers, terrorists,
to corrupt politicians—in order to cover their financial tracks after illegally obtaining money. It’s
well-known that money laundering can often involve foreign banks and legitimate businesses.
Usually, we would discuss on how do banks prevent these illegal activities but this time we are
taking a different path.
How do banks help money laundering?
Well, just by turning a blind eye they do a lot. Banks should show more caution for transactions
from high-risk countries or amounts of 10000 euros or more. Some banks decide to turn a blind
eye on it and just file a report sending it to AML institutions, although they are well aware that it
is easier to prevent money laundering by not dealing with these suspicious clients than to hunt
down the money once they are in the banking system. In other words, banks knowingly decide to
keep on relationships with suspicious clients shifting the responsibility to the authorities by
filling the report.
What else can banks do?
They can assist in mirror trading. Mirror trading is a technique of money laundering conducted
by the costumer with the bank’s complicity. Let’s put it this way, the customer deposits 10000
euros and instructs the bank to buy shares equal to this amount in a market, in the mean time they
sell the same amount in another market. Since in Albania we don’t have an actual stock
exchange this scheme would not be applicable in our country.
Bank’s complicity makes it harder for the authorities to track down the illegal money, but they
encounter other challenges as well. The activities of money laundering are growing in amounts
and are also finding new and sophisticated ways so AML institutions are obligated to spend more
and more, in a way that is non sustainable so they find the need to explore other solutions such as
requiring collaboration between institutions in order to make operations more effective. It is also
important to train highly specialized individuals in order to fight money laundering. One of the
biggest challenges is the fact that the AML authorities receive numerous reports but they cannot
deal with all of them due to the fact that they don’t have enough staff.
Deutsche Bank has been scrutinized and surrounded by controversy in relation to its conduct
leading up to the Global Financial Crisis. When the Global Financial Crisis hit, Deutsche Bank
Group posted its first annual loss in over 50 years. The primary source of these losses was the
Corporate & Investment Banking Division, suffering losses before taxes of €7.4bn. A $14 billion
penalty was imposed on Deutsche Bank by the U.S State Department of Justice for fraudulent
practices in relation to the US sub-prime mortgage market in the lead-up to the 2008 crisis. The
bank admitted responsibility , which cost the federal government $386m when the mortgages
defaulted.