Deutsche Bank settled the Foreign Corrupt Practices Act charges without admitting to or denying the SEC's findings in an administrative settlement Thursday. The bank had hired relatives of foreign officials in China and Russia to obtain business, the regulator said.
"Deutsche Bank provided substantial cooperation to the SEC in its inquiry and has implemented numerous remedial measures to improve the bank's hiring practices," a spokesman for Deutsche Bank said in a statement.
In one of five cases highlighted by the SEC, Deutsche Bank hired the daughter of the chairman of a state-owned company in China, despite the candidate being unqualified for the position, the agency said. The bank went on to carry out two transactions with the Chinese company, according to the regulator.
The employees of state-owned enterprises qualify as government officials under the FCPA, regulators have said. Running afoul of the U.S. law is especially easy in China, where even doctors at state-owned hospitals are viewed as government officials.
In another case, Deutsche Bank hired the son of an executive of another state-owned company in China, even though his résumé contained grammatical errors and typos, the SEC said.
The executive's son was given a "cheat sheet" by a banker for an interview with Deutsche Bank, but still performed poorly, the regulator said. The bank's interviewers thought he was one of the worst candidates they interviewed according to notes taken at the time, the SEC said.
The referral hires occurred despite a written policy Deutsche Bank put in place in 2010 in the Asia-Pacific region to detect and prevent corrupt hiring practices, the SEC said. The bank failed to implement global policies to address the risk until 2015, the agency said.
Deutsche Bank's hiring practices had violated the FCPA's books and records and internal controls provisions, according to the settlement. The SEC fine included a $3 million civil penalty, and $10.8 million in disgorgement, which the agency said represented the amount of profit Deutsche Bank accrued from the referral hires, plus $2.4 million in interest.
Other financial institutions also have come under scrutiny for hiring the relatives of connected Chinese business executives and Communist Party officials, often referred to as princelings.
JPMorgan in 2016 agreed to pay $264 million to the SEC, U.S. Justice Department and Federal Reserve to settle charges it corruptly influenced officials in China and other countries in Asia by giving jobs and internships to their relatives and friends. Credit Suisse settled similar charges in 2018.