Deutsche Bank must pay the largest ever fine levied by the regulator of Dubai's financial free zone for what the watchdog described as "serious contraventions" by the German lender's wealth management business in the emirate.
The $8.4 million levy from the Dubai Financial Services Authority (DFSA) is the latest regulatory blow for the Frankfurt-based lender, which faces billions of euros in potential claims or settlements over alleged manipulation of interest rate and foreign exchange benchmarks.
German investor rights group DSW on Wednesday separately called for an independent, special audit of Deutsche Bank to explore a "long list" of potential threats including fines, settlements and legal proceedings.
A statement from the DFSA said the fine came after an investigation into Deutsche Bank activities between January 2011 and January 2014, initially stemming from concerns that customers were being deprived of protection under the regulator's rules.
This involved Deutsche Bank employees advising clients in Dubai, instead of referring them to other jurisdictions for processing as the bank had told the regulator it did.
The DFSA said that a widening of its investigation found that Deutsche Bank DIFC (Dubai International Financial Centre) was aware that its private wealth-management business was operating in breach of DFSA requirements but did not take adequate steps to address the issue.
Deutsche recently made Dubai its main base for operations in the Middle East and Africa.
As well as failures in its governance and systems and controls over signing up clients, Deutsche was also adjudged by the DFSA to have misled it over its actions.
Ian Johnston, chief executive of the DFSA, told Reuters the fact a significant proportion of the fine was imposed for how the bank initially dealt with the regulator showed the importance placed on transparent dealings with it.
The DFSA noted in its statement that Deutsche Bank had been cooperating with the regulator since January 2014 and the fine had been cut by 20 percent after the lender agreed to settle.
No losses for clients
A statement from Deutsche Bank said the lender had "reviewed and subsequently upgraded" its systems for bringing in clients and emphasized the DFSA investigation had found no evidence customers had suffered financially.
Deutsche said clients were taken on according to its own standards for operating overseas but "without also complying with certain local regulations in the DIFC".
Neither the DFSA nor Deutsche would disclose whether any action had been taken against individuals.
Johnston said the regulator had directed Deutsche to improve governance to make sure senior management are aware of activities taking place in all areas of the bank, and that information given to the regulator was accurate.
Deutsche Bank's profits have been heavily dented over the past two years by provisions for fines and settlements.
At the end of 2014, the bank had set aside 3.2 billion euros in litigation reserves, outlined a further 1.9 billion euros in potential risks and indicated that it faced an additional 4.8 billion euros in mortgage repurchase claims.