Deutsche Bank’s DB broker-dealer subsidiary, Deutsche Bank Securities Inc., was hit with a $4 million penalty by the Securities and Exchange Commission (SEC) on Friday.

The fine was levied due to the company’s failure to promptly file certain Suspicious Activity Reports (SARs) as mandated by the Bank Secrecy Act (BSA). These rules are issued by the U.S. Department of the Treasury's Financial Crimes Enforcement Network.

Regulatory Requirements and DB Securities’ Violations

Under the BSA, broker-dealers must file SARs when they encounter transactions that might involve illicit funds, lack a business or apparent lawful purpose, or are intended to facilitate criminal activity. According to Sheldon Pollock, associate director of the SEC’s New York Regional Office, timely filing of these reports is “of paramount importance.”

The SEC's order revealed that between April 2019 and March 2024, Deutsche Bank Securities conducted SAR investigations in response to law enforcement or regulatory inquiries and litigation. However, the company failed to complete these investigations promptly on multiple occasions. Notably, at least two of the SARs were filed more than two years after the investigations had begun.

Deutsche Bank’s Response to the Violations

The bank has agreed to pay the penalty amount without accepting or denying the SEC’s findings. DB’s management stated that it takes legal and regulatory obligations seriously.

Dylan Riddle, a spokesperson for DB, said, “As noted in the settlement, we have cooperated with the SEC in the investigation and have undertaken remedial actions prior to today’s settlement.”

Deutsche Bank’s Zacks Rank & Price Performance

Over the past six months, DB shares have gained 7.2% on the NYSE compared with the industry’s growth of 2.5%.

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Currently, Deutsche Bank carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Legal Issues Faced by Other Banks

Earlier this month, HSBC Holdings plc’s HSBC Australia unit, HSBC Bank Australia, was sued by the Australian Securities and Investments Commission (“ASIC”) for failing to protect its customers from losing millions of dollars in scams.

According to ASIC’s report from Dec. 16, 2024, HSBC received approximately 950 reports of fraudulent transactions between January 2020 and August 2024, which resulted in a total loss of around A$23 million ($14.6 million) for its customers. Of this total amount, almost A$16 million ($10.2 million) was lost during the six months starting from October 2023 to March 2024.

In the same month, Comerica Inc.’s CMA subsidiary, Comerica Bank, was sued by the Consumer Financial Protection Bureau (“CFPB”) over systematically mistreating its 3.4 million Direct Express cardholders, primarily unbanked Americans receiving federal benefits. 

Per CFPB, Comerica Bank intentionally disconnected 24 million customer service calls before these could reach a representative. Customers whose calls were not dropped were routinely forced to endure excessively long wait times, often above several hours, to speak with a representative to get support with unauthorized transactions, charge disputes and lost or stolen cards.

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