Deutsche Bank Says Software to Detect Money Laundering Had a Bug
nytimes.com
nytimes.com
At least in my opinion, the legislation and big-deal-making is merited in cases like this, for the benefit of society.
"there's no downside except for victims of the crimes that the money originally originated from."
Why don't you detail what happens to people who get flagged by this software. Ie either send or receive suspected laundered money and what the odds are of such a flag actually resulting in a conviction.
If you get "flagged", ALL your funds are immediately blocked, your access restricted however long they wish (meaning think 6 months). The odds of a flag leading to a conviction are not even 2%. Even among those 2%, the vast majority of "money launderers" are victims of deception (for example the old "I'll send you money if you pay me 5/10/20% less of that money on a different account").
So no victims ? The truth is that a few thousand people per month (never saw absolute numbers but that seems a lower bound to me, and this is for a small EU country) are denied access to their own money for months (sometimes years), without so much as an explanation (it is illegal (and legally highly stupid) for the bank to state for what reason your accounts are blocked). Not one of their accounts, all of them. Needless to say, finding stories where this has resulted in making a person or even entire family homeless is not hard.
"No downside". Well, not for banks. Not for governments. For everyone else, extreme downsides.
They are saying that their is no downside, outside of running foul of laws and regulators, for banks to take money without review instead of flagging transactions as suspicious.
Your response is about additional benefits for them taking the money without questions.
Of course, if I tune my cynicism level a bit darker that line of thought breaks down again, because then I start factoring in the possibility of "premium service tiers" with fees so high that a) no client in their right mind would ever consider them unless they have very pressing reasons to be friendly with the bank and b) no reasonable finder's fee could ever hope to win the bidding.
If we take the parent comment to be true, the fees levied against the institution for being caught (provided they can't worm their way out of it in the first place) are merely a slap on the wrist.
Banks would still just catch the small fish who shop around for the lowest rates like a regular person. In the end, sibling comments about snakes and hazards are right.
"Fees" are not levied against an institution, "fines" are. And in that light, yes, fines are indeed too low to thwart a failure to identify the correct transactions.
Of course, it all wraps back around; the bank would need to have some sort of incentive to lobby for this, and given that they are potentially making money hand over fist not to, and given the current allegations against the governing body...
Sorry for being too ambiguous, "it all wraps around" on my end as well.
Of course the danger of such a system is banks would be overzealous in their reporting in the hopes of getting a lucky payout. That's another pitfall that would need to be addressed with fines or incentives. My point is that it's not inherently bad when businesses are rewarded for doing the right thing.
Then on top of that politics come into play, with all these increasing trade embargoes and bi-lateral agreements, many transactions could be interpreted either as laundering or legit, depending on interests.
That’s exactly how the system works though, minus the reward. The AML Officer is personally responsible for implementing policies & procedures that are “reasonably designed” to prevent and detect money laundering. Then the banks report their suspicions to the government. The government is not the first line of defense or even investigation when it comes to money laundering.
The only people who get hurt are the patsies whether low to mid tier bank employees who are left hanging in large case or the victims of the laundering process which can be tricked into participating in the process through deception e.g. P2P loan schemes and transfer schemes or those who are employed by shell entities used in layering.
If you are getting flagged for money laundering you are utterly fucked.
You can’t access any of your accounts, your credit is frozen, even if you by some luck don’t lose your employment even your paycheck can be directly or indirectly withheld and you will be audited by your friendly tax authority.
The shadow economy is huge in many places it can be as large or even larger than the real economy and many nations including EU members actively support it because they rely on it.
I like how you frame avoiding profiting from crime not only as being humanitarian but actually as being super humanitarian.
To be honest, I find your comment quite frightening. I think bankers viewing being honest as a humanitarian act is in and of itself a much larger problem than faulty software.
The comment I was replying to was implying that in the absence of laws banks would have no incentive other than super humanitarianism for preventing obvious money laundering. That's beyond potential misuse. That's profiting of a crime out of pure greed. I know cynicism is currently fashionable but I would still expect most people to find that questionable.
I don't need banks monitoring and selling my purchase history to their "affiliates", like insurance companies, so that they can build shadow profiles.
Maybe I'm buying vegan groceries, getting wheat grass enemas and giving my money to the poor. Or maybe I'm spending it on McDonald's, hookers and blow. Either way, it's nobody's business but my own.
Flagging suspicious transactions and verifying that they're legit is costly. Spending money to reduce profit for the common good is humanitarian. It has little to do with being honest. If the bank does nothing, the bank doesn't lie, it just doesn't go out of their way to verify that other people aren't dishonest. And the fact that people view letting bad things happen by inaction as less bad (or even not bad) shouldn't be a surprise. It's just human nature. And when someone pointed this out, you decided they were Bad and Frightening. Because they said people will follow incentives in a well-known moral hazard scenario. Get a grip.
https://translate.google.com/translate?hl=&sl=de&tl=en&u=htt...
Deutsche Bank has been revealed to be systematically laundering Russian cash for years, to the point where you see a headline about "bank gets caught laundering Russian money" its almost always DB.
EDIT: I am sure what happened in this thread. Several comments, including this one, were decoupled from the comment they were responding to even though the original wasn't deleted or flagged. Removing that context makes some of these comments harder to follow.
https://www.nytimes.com/2019/05/19/business/deutsche-bank-tr...
In that kind of shop a bug is a big deal.
I'm pretty sure this bug was known for some time as well
While money is absolutely laundered via real estate and art, that's not what this software detects. The podcast The Dark Money Files is really good if you want to learn more about this. [1]
Facebook received the same treatment, once they lost their golden boy status.
As someone who never engages in fraudulent transactions, if I were a DB customer I'd be much more concerned about the false-negative rate of such software.
Well, everything that has no built-in means of proving legitimacy. I've read multiple times that the only real thing Bitcoin offers is protection against counterfeiting and no one gives a damn about that because faith in the system backs our money so counterfeiting isn't a big problem. In the hypothetical scenario, though, it becomes the primary problem, and overnight only cryptocurrency can be proven to mean anything at all. Everything else would just be unreliable nonsense numbers based on rotted code.
I can't translate the German site as I can't really get to it due to a popup.
A math problem, just not checking some transactions, something else?
Is all the further information in the German article.
(Just to add the other small part.)
Remember this when you read articles about subjects you are not knowledgeable about.
The quality of journalism seems to have been hit hardest by this philosophy. For over a year all of us around the world have been hearing about something called a Mueller Investigation from the news media in the USA, and now despite the fact that it has cleared the President and his campaign of the allegations made, not a single media outlet has walked back the insinuations made with this style of reporting which, through lawyerspeak essentially declared him guilty without saying it outright, but close enough for it to convince the general public.
It's really unfortunate because the media has a very important responsibility. Based on the behavior of journalists that I see on social media, it seems like overgrown children are running things. One such example is a lady named Sarah Jeong who has written some really disgusting tweets on social media, and was given a relatively important position at NYT.
https://www.washingtonpost.com/world/national-security/muell...
The premise is that this investigation team was seen by the entire country as a fair party to conduct an investigation and reach a conclusion. Now that the conclusion is not what the news media was suggesting all this time, there's all kinds of skepticism and wanting to see the work.
This is an echo of 2016 again. The news media alluded to an entirely different election result, the result was the complete opposite, and slowly everyone started to question how the media could be so wrong again.
It seems like everyone's standard for truth is "if reality contradicts the media it means something is being hidden" as opposed to "the media was wrong because they are bad at this"
As for the obstruction aspect - isn't that now a mere technicality? A man and his team have been falsely accused, he tried to get out of the burden of being politically undermined by the drama of an investigation that would clear him in the end, which it did, but not without massive damage to his political capital, which it did. I am sure other governments were also following this closely, and it most certainly would have had an effect on foreign relations.
That sounds exactly like what any innocent person would do. If the government in my country shows up at my door tomorrow with some incorrect charges, my first reaction is to get rid of the investigation by whatever means necessary because I don't want to go through the nightmarish ordeal.
What's being argued is that he tried to fire the guy who would end up proving he was innocent? Is that the level of partisanship that your country has reached today? It's really not helpful to any society when things get that bad. It's the same "get him by any means necessary" attitude that I referenced in my earlier comment. We couldn't get him on the original accusation so now let's get him on how he reacted when we accused him.
And even worse you start to see people taking advantage of these human weaknesses. Politicians are perhaps the worst offenders but it is also common in advertising, business and even personal relationships. Somewhat depressing.
Trying to make the case for a rational, objective reading of the Mueller Report is futile while the news media, social media and most people you meet are spewing unfounded innuendo (see OP for example) and outright disproven conspiracy theories.
You are literally arguing that if you feel you are innocent, you are able to obstruct an investigation because you know you are innocent. That is not how justice works and is circular logic that empowers officials to cover up their own misdeeds. Obstruction is a crime in itself because it prevents an investigation from proceeding and shows a guilty conscience.
This is what I am referring to in my original comment about the quality of journalism and its motivations - it's an endless chase, and to be honest he's right to call it a witch hunt against him specifically.
he colluded
he didn't collude but he obstructed
he didn't obstruct but he wanted to
That's the point being made here - the media is not doing its due diligence and is generally engaging in predicting the future or misrepresenting facts.
You don't need to imply anything sinister, the sinister stuff is fact
Mysterious "software bugs" that allow people to transfer millions of dollars to questionable characters in known corrupt countries are excuses, not defects. I guarantee that if you or your LLC wired >$5k regularly to somebody in the Ukraine every once in awhile, the best case for you would be your account being frozen.
Also, wonder how they're verifying "The bank maintained that no suspicious transactions had slipped through as a result."
or
2. get a bunch of low level analysts or interns to review all past transactions
More seriously, the background seems to be that DB has poor controls overall, so likely this tagger was simply combined with something too permissive and the error ends up not mattering very much.
I have no inside information, but I will observe there's a well-traveled road where organizations end up loudly announcing they couldn't find any exploitation of a given bug, or that it was limited to scope X, only to later announce that, oh, whoops, they found some, or that the scope was larger than they thought.
Sometimes I find it easy to believe it's honest, like an ongoing security incident for a relatively transparent organization where the news is only hours old. Sometimes... I find it quite easy to believe it's not honest. I don't have enough info to decide in this particular case but it wouldn't shock my priors for it to be the latter here.
*backdoor
And now they found a bug :)
A link I posted earlier in this thread - https://www.nytimes.com/2019/03/18/business/trump-deutsche-b... provides more on this.
That makes it more newsworthy.
If you're interested, there was a great podcast on the president's reliance on Deutsche Bank overlooking his never-ending bankruptcies and refusal to pay back loans, when no other bank would touch him.
https://www.npr.org/programs/fresh-air/2019/05/09/721726619/...
If you're not interested, you're just trolling.
Environment accident with an American oil company? They are victims from a foreign gov: https://www.nytimes.com/2011/11/19/business/energy-environme...
Antivirus malicious companies? It's always Kaspersky problem: https://www.nytimes.com/2018/01/01/technology/kaspersky-lab-...
1. Deutsche Bank facilitated a basket option trading strategy used by Renaissance Technologies, which has since earned the latter an investigation from the IRS for aggressive tax avoidance. RenTech is (unfortunately) synonymous with Robert Mercer's political activity in the eyes of many because he was a major partner and CEO of the hedge fund before he stepped down last year. This leads to my second point.
2. Deutsche Bank is (separately from RenTech) involved with Donald Trump in a number of real estate dealings, which other commenters have already cited. Regardless of your personal stance on the president, the NYT is going to spend time investigating any areas of financial misconduct it can find which may be directly or indirectly related to the president.
Most (perhaps all) of the big banks have a list of fines, crimes, and scandals, but Deutsche Bank's list seems particuarly egregious.