Legal Business

‘A reaction’: Deutsche Bank to establish new EMEA anti-fraud, bribery and corruption team

‘A reaction’: Deutsche Bank to establish new EMEA anti-fraud, bribery and corruption team

After being hit by a number of recent financial crime and anti-money laundering scandals, Deutsche Bank moved to establish a new anti-fraud, bribery and corruption team for the EMEA region last month.

The bank is looking to fill 400 positions this year globally in anti-financial crime and is recruiting for a new team in Europe to be led by regional head of anti-financial crime, Thomas Altenbach. The team will sit outside of the legal function, with four new recruits: one hire at director level and three other individuals with experience in anti-fraud, bribery and corruption matters. Deutsche Bank anti-fraud teams have historically comprised both legal and compliance professionals.

A spokesperson for the bank declined to comment on specifics but said in a statement: ‘Deutsche Bank has significantly strengthened its systems and controls. By the end of the year we will have hired approximately 1,000 additional staff in compliance and anti-financial crime since 2015.’

In January the bank finalised a $7.2bn settlement in principle with US authorities over the mis-selling of residential mortgage securities before the 2008 financial crisis. Again in January, it emerged both White & Case and Sullivan & Cromwell advised the bank as it was fined a total of £500m by both the Financial Conduct Authority (FCA) and the New York Department of Financial Services over money laundering claims. The bank was fined £163m by the FCA and $425m by the American regulator.

One City white-collar private practice partner compared this move to that of Siemens following a string of bribery scandals that ultimately led to a $1.6bn settlement with American and European authorities. ‘Deutsche Bank has had its issues and still has its issues. Siemens went off and hired 500 compliance people after the problems it had with the US government. Those are a lot of hires and it does sound like a reaction to something, rather than incremental.’

madeleine.farman@legalease.co.uk

Legal Business

‘A reaction’: Deutsche Bank to establish new EMEA anti-fraud, bribery and corruption team

‘A reaction’: Deutsche Bank to establish new EMEA anti-fraud, bribery and corruption team

After being hit by a number of recent financial crime and anti-money laundering scandals, Deutsche Bank moved to establish a new anti-fraud, bribery and corruption team for the EMEA region last month.

The bank is looking to fill 400 positions this year globally in anti-financial crime and is recruiting for a new team in Europe to be led by regional head of anti-financial crime, Thomas Altenbach. The team will sit outside of the legal function, with four new recruits: one hire at director level and three other individuals with experience in anti-fraud, bribery and corruption matters. Deutsche Bank anti-fraud teams have historically comprised both legal and compliance professionals.

Legal Business

Comment: Clients and rookie lawyers – some awkward truths and a fatuous debate on training

Comment: Clients and rookie lawyers – some awkward truths and a fatuous debate on training

Ah, despite the changing fashions, technology and economic realities of the day, in law you can always rely on that curious mix of mutual hypocrisy, miscommunication, mistrust and conflicting agendas between clients and law firms to endure.

The latest flashpoint is Deutsche Bank’s current panel review, which has pressed tendering law firms to write off time for trainees and newly-qualified lawyers handling its matters. Though it appears that not all have consented, for many this is the thin end of the wedge and a worrying sign that this US trend is making its way over here.

On this debate, neither of the opposing sides is that convincing, ignoring some awkward truths about how and why the buy/sell thing works as it does in corporate law.

Firstly, the argument that clients do not want to pay to ‘train’ junior lawyers is in itself fatuous, since the expanding ranks of in-house teams are stuffed nearly exclusively from law firm alumni and in-house teams themselves make such a marginal contribution to developing the profession. Likewise, the familiar general counsel gripes about time-based models, either through hourly billing or utilisation, would be more credible if in-house legal teams had not proved next-to-useless for 20 years now at supporting or encouraging value-driven billing.

If this all sounds too pro-law firm, their position is not any better. Corporate clients get charged a lot of money because the UK legal profession is part of a global arms race in profitability that has bid up the wages of junior lawyers and the expected compensation of equity partners to levels that the law firm model struggles to sustain.

The influence of US law firms in London in transmitting wage inflation is particularly ironic, as it is US pay scales – lacking the shock absorber of a two-year training period – that explain why US corporates have for years been writing off junior lawyer time in significant numbers. Importing such pay models into London has only aggravated the situation. Likewise, a huge part of the fees charged to clients derives from the inflationary impact of the partner transfer market.

In reality these issues could be relatively easily managed through market forces if the underlying issue was dealt with: mispriced resources.

Both the comp and billing structure of law firms from trainee to equity partner are too compressed, leading to perverse pricing decisions. As Legal Business has argued before – trainees and junior lawyers should be paid a little less and correspondingly charged out at lower rates.

Mid-level associates – the backbone of a high-quality law firm – should be paid more and charged out a little higher. Partners are paid enough but should generally be charged out at higher rates. The reason why clients always want partner time is obvious: it is subsidised in terms of cost to the law firm. Client expectations of free training and discounted secondees only aggravates the pricing inefficiency and sees bluechip clients that can get the freebies effectively subsidised by the smaller clients that cannot.

As the chances of these issues being addressed by either side is pretty much zero you can expect both camps to continue to try to game each other. Law firms will also try to square the circle with increasing uses of technology and paraprofessionals, which at least tangentially addresses the core pricing issues.

Such tensions will only reinforce the already perceptible shift by advisers away from their once obsessive focus on handling transactional work for major banks towards funds, sponsors, growth companies and contentious work in general. Some things, it seems, do change, even in law.

alex.novarese@legalease.co.uk

Legal Business

Shearman, HSF and Milbank join Deutsche Bank panel as junior lawyer rules prove controversial

Shearman, HSF and Milbank join Deutsche Bank panel as junior lawyer rules prove controversial

Herbert Smith Freehills, Shearman & Sterling, Milbank, Tweed, Hadley & McCloy and Reed Smith have also taken places on Deutsche Bank’s controversial new legal panel.

The firms take their places alongside more than a dozen others – including the entire Magic Circle, on the panel which has made headlines after the bank attempted to remove fees for junior lawyers.

Others on the panel include Ashurst, Simmons & Simmons, Taylor Wessing and Hogan Lovells. US firms on the new panel include Latham & Watkins, Cleary Gottlieb Steen & Hamilton, Mayer Brown and White & Case.

The review process, which is understood to be mostly complete, stemmed from a request for proposal sent out to help Deutsche analyse its current policies and processes for external legal counsel. The process, dubbed ‘Project Eagle’, was led by global chief operating officer of legal and compliance Rose Battaglia, with appointments expected to last two years.

As part of the panel review, at tender stage, the bank attempted to implement a system under which trainee and newly-qualified lawyers would not be able to charge for work they carried out.

The system, which is more common in the US, has drawn some strong reactions from the profession. However, it is understood some firms on the panel were able to negotiate themselves out of the system.

One City partner from a panel firm said: ‘We were very concerned with it. Some firms pushed hard, some successfully, not to comply with that request. Those are the firms which offer the bank value for money.

‘I have some sympathy for Deutsche’s push. It doesn’t want to pay a one-year qualified lawyer, who is still an expensive asset, to do non-value-add work. It doesn’t want lawyers to learn on the job for them and get paid £250 an hour.’

However, one head of finance at a Deutsche panel firm said the trend for institutions to delete junior lawyer fees is ‘just for show’. He added: ‘For the purposes of presenting fee estimates, it’s a matter of the relationship between the institution and the relevant law firm as to how those numbers are presented.

‘If that means the client’s desire is not to show junior lawyer time because they feel the customer doesn’t want to pay for it, fine. But the figure will be the figure.’

A Deutsche Bank spokesperson declined to comment.

tom.baker@legalease.co.uk

georgiana.tudor@legalease.co.uk

Read more £- ‘Clients and rookie lawyers – some awkward truths’

Legal Business

City elite dominates again as Deutsche Bank nears conclusion of panel review

City elite dominates again as Deutsche Bank nears conclusion of panel review

Panel firms resist attempts to remove junior lawyer fees from pricing

While more than a dozen firms – including the entire Magic Circle – have made it onto Deutsche Bank’s latest global legal panel, an attempt by the bank to remove fees for junior lawyers has proved controversial.

The review process, which is understood to be mostly complete, stemmed from a request for proposal sent out to help Deutsche analyse its current policies and processes for external legal counsel. The process, dubbed ‘Project Eagle’, was led by global chief operating officer of legal and compliance Rose Battaglia, with appointments expected to last two years.

Legal Business

Adviser review: Deutsche Bank close to finalising panel roster

Adviser review: Deutsche Bank close to finalising panel roster

Deutsche Bank is close to completing a review of its global legal panel, with the entire Magic Circle heading up the list of those who have already made the cut.

Combining its UK and global panels into one roster, Deutsche Bank has enlisted Ashurst and Simmons & Simmons in addition to a contingent of US heavyweights.

Latham & Watkins, Cleary Gottlieb Steen & Hamilton, Mayer Brown and White & Case comprise the US firm offering alongside transatlantic firm Hogan Lovells.

The process was overseen by global COO of legal Rose Battaglia, with pricing a prominent factor in Battaglia’s decision-making. Battaglia took control of the process on behalf of Simon Dodds and Christof von Dryander who were appointed co-GCs in January 2016.

The current panel replaces its 2015 iteration, when then-GC Richard Walker appointed Freshfields Bruckhaus Deringer, Allen & Overy, Hogan Lovells, White & Case, Ashurst, Cleary and Latham & Watkins. Deutsche Bank’s panel arrangements typically last for two years.

Earlier this month, US litigation specialist Scott + Scott announced its intention to pursue action against Deutsche Bank over forex manipulation. More than 40 European claimants are on board for the action, and follows a US judge’s decision in February 2017 to reject Deutsche Bank’s attempt to have a ‘last look’ lawsuit dismissed. That separate action relates to Deutsche Bank’s utilisation of a short time-lag between transactions to maximise potential profits.

In summer of last year, Deutsche Bank suffered a succession of high-profile departures, with global legal strategy head Emma Slatter and head of active asset management James Hooper both confirming exits within days of each other. Hooper joined boutique investment firm J O Hambro Capital Management, having been employed with Deutsche Bank since 2006. Slatter left after 20 years at the company to set up a consultancy advising on a range of business ventures.

tom.baker@legalease.co.uk

Read more in: ‘A buyers’ market – The trends and traumas in adviser reviews’

Legal Business

Scott + Scott to take on Deutsche Bank in Europe after US success

Scott + Scott to take on Deutsche Bank in Europe after US success

US law firm Scott + Scott says it has signed up more than 40 European claimants as it gears up to take Deutsche Bank to court over forex manipulation.

The firm, which launched in London in 2015, says it has already secured over £2bn in compensation for victims of banking misconduct and has about 40 European claimants currently on board for further litigation of this kind.

Scott + Scott’s European move, led by managing partner David Scott (pictured), comes almost a month after a US judge rejected Deutsche Bank’s attempt to have what is known as a ‘Last Look’ lawsuit dismissed.

That action brought by Axiom Investment Advisors relates to Deutsche Bank’s utilisation of a short time-lag between a client’s order being placed and executed in order to maximise the bank’s potential of making profit. The practice, known as ‘Last Look’, delays transactions by several hundred milliseconds to carry out trades when exchange rates are most profitable for the bank. Last Look is understood to potentially cost investors like Axiom millions of dollars due to delayed transactions.

Barclays opted to settle a similar dispute with Axiom for $50m in February of last year. Barclays, who has now agreed to provide assistance to Axiom in any future related lawsuits, was alleged to have used Last Look to maximise profits.

For that suit, Deutsche Bank turned to Kirkland & Ellis for its counsel, with litigation partner Joseph Serino representing alongside Robert Khuzami and Eric Leon. For Axiom, Christopher Burke led for Scott + Scott with George Zelcs of Korein Tiller, Michael Hausfeld of Hausfeld and Linda Nussbaum of Nussbaum Law Group also providing assistance.

A statement from Scott + Scott read: ‘We are looking forward to fighting Deutsche Bank in court over its wilful misconduct through the use of Last Look and profiting at the expense of clients.’

In summer 2015, Scott + Scott opened its London office with the intention of pursuing banks thanks to the newly-enforced Consumer Rights Act. The Connecticut -based litigation boutique hired former Freshfields Bruckhaus Deringer competition litigation lawyer Belinda Hollway to head up the new outpost.

Deutsche Bank refused to comment on the case.

tom.baker@legalease.co.uk

Legal Business

White & Case and SullCrom advise as Deutsche Bank fined over £500m for money laundering claims

White & Case and SullCrom advise as Deutsche Bank fined over £500m for money laundering claims

White & Case and Sullivan & Cromwell have advised Deutsche Bank as Germany’s largest lender has been fined £500m by the Financial Conduct Authority (FCA) and the New York’s Department of Financial Services over money laundering claims.

UK financial watchdog fined Deutsche Bank £163m for failing to maintain an adequate anti-money laundering (AML) control framework between 2012 and 2015. It is the largest financial penalty for AML controls failings ever imposed by the FCA.

The fine was issued after an FCA investigation into allegations the bank was used by unidentified customers to transfer $10bn out of Russia ‘in a manner that is highly suggestive of financial crime’. Deutsche Bank turned to White & Case dispute resolution partner John Reynolds for legal advice in London.

Deutsche Bank received a 30% discount after it agreed to settle during the early stages of the FCA investigation bringing it down from £229m. The discount did not apply to the £9.1m in commission the bank generated from the suspicious trading that it had to pay the FCA.

Director of enforcement and market oversight at the FCA Mark Steward said: ‘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.’

In a separate settlement announced overnight, the New York’s Department of Financial Services confirmed Deutsche Bank will also pay $425m (£340m) to the state’s main financial regulator. The US regulator said in a statement it had worked closely with the FCA on the enquiry which was related to the same transactions.

Sullivan & Cromwell white collar partner Samuel Seymour advised Deutsche Bank on its US settlement.

madeleine.farman@legalease.co.uk

Legal Business

Deutsche Bank litigation costs jump as bank reports small profit

Deutsche Bank litigation costs jump as bank reports small profit

Deutsche Bank has increased its litigation provisions from €5.5bn to €5.9bn for the third quarter of this year, while the German lender recorded an unexpected profit, beating analyst expectations.

For the three months to the end of September, Deutsche made a net income of €278m and a pre-tax profit of €619m, despite reports in early October that its shares dropped after chief executive John Cryan failed to reach a deal with the US Department of Justice to lower a $14bn fine. The fine relates to allegations of mis-selling mortgage backed securities before the financial crisis.

The net profit figure constitutes a major shift on the €6bn loss recorded by the bank during the same period last year.

The results follow research published by Thomson Reuters in late September, which showed an intense cost drive faced by major clients across all industries. The figures show that FTSE 100 companies have set aside £31.3bn in the last year for legal provisions, a rise of 22% from £26.5bn the year before. The banking sector in particular accounts for 56% of the total provision for legal liabilities among FTSE 100 companies, up from 54% in 2014.

The sector’s anticipation of further hikes in disputes and fines contributes towards much of the sharp rise, with ongoing hurdles faced by UK-listed banks including claims in relation to Libor and Forex manipulation, ponzi schemes, manipulation of energy markets and of precious metal prices and PPI mis-selling.

BAE Systems general counsel Philip Bramwell said: ‘The challenges with banks relate to the environment they operate in – their checks and balances are externally applied. They face massive degrees of regulation and house huge legal functions that spend their time ensuring that external regulation is impeccably complied with.

‘Don’t forget they’re operating in a manmade system – the global financial economy susceptible to enormous shocks. They are not masters of their own destiny.’

Last year Deutsche announced plans to cut 15,000 jobs and businesses employing around 20,000 staff as part of a major restructure. Separately, its legal team has seen some key departures too, including global head of strategy for legal Emma Slatter, who left the bank after 20 years.

sarah.downey@legalease.co.uk

Legal Business

Deutsche Bank exits continue as Hooper leaves for funds firm

Deutsche Bank exits continue as Hooper leaves for funds firm

Just days after news of the departure of Deutsche Bank’s global legal strategy head Emma Slatter, it has emerged that the bank’s head of active asset management James Hooper is also departing.

Hooper will join boutique investment firm J O Hambro Capital Management as the fund’s second in-house lawyer.

Hooper has been at Deutsche Bank for a decade, serving as vice president and legal counsel from 2006 to 2010, then as a director and senior counsel. Since 2013 he has worked as head of active asset management where he was responsible for the team providing advice to active asset management, alternatives and private wealth management businesses in the UK and Channel Islands.

Trained as a solicitor at Ashurst, Hooper spent seven years at the LB 100 firm before then moving in-house.

J O Hambro confirmed that Hooper would be joining as legal counsel on June 6.

The move comes after an internal memo revealed on Tuesday (May 31) that Deutsche Bank’s Slatter was leaving to start her own consulting firm.

Slatter, who featured in the 2016 GC Power List, had headed a 150-strong legal team across London and Birmingham.

Other recent exits from the bank include supervisory board member Georg Thoma who stepped down in April this year, two years before his contract ended.

General counsel Richard Walker left last December after coming under fire from German financial regulator Bafin due to a report published by the Wall Street Journal that detailed the bank’s handling of the Libor manipulation saga.

Deutsche Bank was approached for comment.

matthew.field@legalease.co.uk