The bank will pay the UK's Financial Conduct Authority (FCA) just over £163m and the New York State Department of Financial Services (DFS) $425m (£340m) under the terms of the agreements, which were finalised following the regulators' investigations into securities trades conducted across Deutsche Bank's offices in Moscow, London and New York between 1 January 2012 and 31 December 2015.
Deutsche Bank received a 30% discount on the FCA fine due to its early settlement with the regulator, and was credited for its cooperation with the investigations conducted by both regulators and for the subsequent steps it has taken to improve its AML controls.
According to the FCA Deutsche Bank had an "inadequate AML control framework" which allowed approximately $10 billion, the origins of which is unknown, to be transferred from Russia into offshore bank accounts. The transfers were made by "unidentified customers … in a manner that is highly suggestive of financial crime", it said.
The UK regulator said Deutsche Bank had breached UK financial services regulations, including rules that require firms to take reasonable steps to organise their affairs responsibly and effectively, including by implementing adequate risk management systems.
Issues highlighted by the FCA included deficiencies with regard to Deutsche Bank's customer due diligence and 'know your customer' checks, the IT systems the bank used for AML purposes, and the company's AML policies and procedures.
Senior managers at the bank also "missed key opportunities to detect, intercept and investigate a long-running mirror-trading scheme facilitated by its Moscow branch and involving New York and London branches", the DFS said.
Deutsche Bank said it is working with other regulators and law enforcement bodies, as well as conducting its own investigation into the trades at issue.
Mark Steward, director of enforcement and market oversight at the FCA, said: "Financial crime is a risk to the UK financial system. Deutsche Bank was obliged to establish and maintain an effective AML control framework. By failing to do so, Deutsche Bank put itself at risk of being used to facilitate financial crime and exposed the UK to the risk of financial crime."
"The size of the fine reflects the seriousness of Deutsche Bank’s failings. We have repeatedly told firms how to comply with our AML requirements and the failings of Deutsche Bank are simply unacceptable. Other firms should take notice of today’s fine and look again at their own AML procedures to ensure they do not face similar action."
Maria Vullo, financial services superintendent at the DFS, said financial firms that operate globally "must be ever vigilant in the war against money laundering and other activities that can contribute to cybercrime and international terrorism".
"The offsetting trades here lacked economic purpose and could have been used to facilitate money laundering or enable other illicit conduct, and today’s action sends a clear message that DFS will not tolerate such conduct," Vullo said.