Money Laundering
In 1994 I was asked by my superiors at Bankers Trust to take over the global private banking business. I had mixed feelings about the assignment since I had only been in my prior job for eighteen months (just about the time one gets a head of steam going) and private banking had been one of the backwaters of banking for years, being what was called a “walk the dog” service business. But my mantra for the prior twenty years had been to salute and accept my orders and make the best of the new assignment. So, that’s what I did.
Unlike any other new assignment I had ever jumped into (and there had been many – about eleven by then), I was confronted with a number of “special briefings” that were required. These all had to do with the perception by regulators and law enforcement that the private banking business was a highly sensitive arena that was fraught with important “information” issues. This meant that national security interests needed to be served in many ways. This was all eye-opening to me since none of this went on in the many other areas I had been a part of or run. Even now, twenty-five years later, I am hesitant to communicate too many details of those briefings (I have no idea whether there is a sunset on my obligations for discretion). But what I will say is that much of the concern was about the private movement of funds across borders and the full reporting of that information via various means to the proper authorities. These were not optional reporting, these were mandatory and serious. In fact, every banker in the division needed to be properly trained on AML (anti-money-laundering) tactics, including how to spot suspicious activities and what to do. We had equal emphasis on “White gloves” methods, meaning the thorough vetting of clients or potential clients based on things ranging from their political and legal profiles as well as any criminal connections. We actually had different colored files, meaning that a red file was a big warning about taking business from someone who had way too much uncertainty about where they got their money and what they were doing with it.
People generally think this Patriot Act activity started after 9/11, but the truth is that it was in full swing long before that. I recall what we used to use as the symbolism of what we didn’t want. We didn’t want an Imelda Marcos situation, someone perceived as having pillaged her country’s wealth for her own coffers. The source and use of wealth was already understood to be an important strategic weapon that needed to be carefully tracked. To be sure, this had the two-headed objective from a business standpoint. We wanted to “do the right thing” by the standards of our government and rules and regulations. But we also wanted to protect our image. There was no more certain way to ruining the pristine nature of one’s private banking “discrete” image than to have a high-profile person who we had to ask to leave our ranks as a customer. That sort of story ran around the industry in a heart-beat. Discretion and cleanliness are tantamount for a successful private bank.
In 1998, I was then a member of the Management Committee of Bankers Trust, and we were bid for and eventually acquired by Deutsche Bank. I was part of the decision-making body (at least a small part of that…the real decision being made by the Chairman and the Board). One of the guiding principles of the “merger” was that we would pursue a “best of breed” approach to deciding who would run different areas that were duplicated. My counterpart in private banking at Deutsche Bank was a rather regal and well-connected German fellow by the name of Bernd-Albrecht von Maltzan. Best of breed was not a debatable issue to Deutsche Bank, that went to Count von Maltzan and it was decided without discussion before the day of announcement, since I was asked on that day to fly to Frankfurt to surrender my sword of the private banking business. While I had to preside over the department until the formal consummation of the deal in mid-1999, I went about the transition as required. It was more than a little ticklish with regard to the national security issues and there was a rather extensive coordination with the proper authorities at the Federal Reserve and the rest of the interested Washington parties (if you know what I mean). Passing off this sacred obligation to a non-American, located in Europe was not unique, just delicate.
So here is the thing I now face. I have to watch these reports about Donald Trump and Deutsche Bank knowing that my old unit (what became the U.S. arm of Deutsche Bank’s private banking business) is in the thick of it. The people have mostly changed, but the protocols have done nothing but become more rigid with the heightened terrorism and money laundering concern. I also know how extra-careful we were about doing business with property developers because one of the great “loopholes” in the whole money-laundering kluge was the buying of properties from those developers by foreign persons or organizations. Donald was a big client of Bankers Trust, but he was handled exclusively by the Real Estate Division because he was, even then and maybe especially then given his shaky financial situation, considered too hard to handle. I guess some time aster I left Deutsche Bank in 2000, Mr. Trump gravitated to being handled by the private banking folks. Knowing how these things happen, I’m guessing Count von Maltzan pushed hard for this potential big revenue source to come into his group. I was always pushing hard for that not to happen because of the big skull and crossbones on that particular red file.
When I now read about the supposed suspicious activity report (SAR) suppression that the New York Times reported of Deutsche Bank, I cringe. I ran this unit. I regularly had to approve SAR’s. I would NEVER dream of overruling a compliance officer’s recommendation of submitting an SAR. I would view it as incredibly dangerous (for the country, for the bank, for the officers under my command and for me) to do anything but allow the submission. As I read of all of this, it can’t help but bring back lots of memories and make me shake my head. This is one I understand all too well and that does not help me to stop my anti-Trump sentiments.