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Tax Officials Investigate Euro Pacific Bank in Puerto Rico

Tax authorities from the United States and four other countries have joined forces to stop shadowy global money networks that use international borders to stymie local investigations.

Their first coordinated move against a target is not in some far-flung country. It is on U.S. soil.

A team of international investigators is scrutinizing Euro Pacific Bank, a boutique financial firm based in Puerto Rico, a joint collaboration by The Age, an Australian newspaper, the Australian version of “60 Minutes” and The New York Times found. A number of people accused or suspected of tax evasion and money laundering kept accounts at the bank, according to officials involved in the investigation. They want to know what role it may have played in helping them move money illegally.

While obscure, Euro Pacific has ties to some famous names in the financial world. It was founded by Peter Schiff, a well-known libertarian economist with a deep-seated animosity to paying taxes who earned the name Dr. Doom after correctly predicting the 2007-8 financial collapse. It also has a financial relationship with the Federal Reserve Bank of New York, which is uncommon for its type of financial firm, and links to big institutions in several countries, including Australia, Britain and Canada.

Neither Euro Pacific Bank nor its personnel have been charged with wrongdoing. Daniel Kramer, its spokesman, declined to answer questions about the investigation. Based on the conclusions they make, the agencies can bring criminal charges, civil complaints or other actions in their home countries against their investigative targets.

This is not the first time that global authorities battling dirty money have focused on Puerto Rico. The U.S. territory has long used tax breaks, favorable regulations and other inducements to build up its small financial industry.

Credit…Joe Buglewicz/Bloomberg, via Getty Images

Easy regulations have led to standards that sometimes lag those elsewhere, according to some regulators. Last year European Union officials included the U.S. territories of Puerto Rico, the Virgin Islands, Guam and American Samoa on a list of places with “strategic deficiencies” in anti-money-laundering laws, along with countries like Iraq and Libya. The Trump administration objected, and a later version excluded the American territories.

Puerto Rico has also encouraged the creation of boutique banks that cater to international investors, called international finance entities, or I.F.E.s, like Euro Pacific Bank. Last year, the New York Fed grew concerned about how I.F.E.s in Puerto Rico and the Virgin Islands scrutinize their customers. It stopped allowing the firms to open accounts with the Fed, which made it easier for them to send and receive money around the world.

The New York Fed restarted approvals this year after strengthening compliance requirements and “know your customer” rules. Firms that already had accounts with the Fed have until March to comply.

Puerto Rico requires that I.F.E.s hire at least four local employees. That low threshold thwarts the government’s intention to create jobs and makes it difficult for the firms to follow money-laundering laws, said George Joyner, former chief of the territory’s financial regulator.

“The purpose was to build out a robust international financial sector,” Mr. Joyner said. “But it really hasn’t done that. You can’t have a robust anti-money-laundering program or know your customer program with just four people.”


Credit…Gabriella N. Baez for The New York Times

The investigation into Euro Pacific Bank is being conducted by tax officials in the United States, Australia, Britain, Canada and the Netherlands. They formed the Joint Chiefs of Global Tax Enforcement, or J5, two years ago to swap information. They were inspired by the disclosure of the Panama Papers, the leaked documents that detailed how the rich hide their money.

Agents with the Internal Revenue Service have interviewed Mr. Schiff and the bank’s president, Mark Anderson, for the investigation, nicknamed Operation Atlantis.

Officials involved with the investigation declined to discuss details, but evidence circulating among the agencies suggests they are raising questions about Euro Pacific and its clients.

Its client list has included Michael Wilson, who pleaded guilty to wire fraud in 2017 in federal court in Buffalo. The authorities seized $750,000 he held in four Euro Pacific accounts.

It also included Simon Antequil, the founder of an Australian payroll services company where employees illegally funneled more than $75 million that should have gone to taxes or retirement funds into shell companies. In July, Mr. Antequil was sentenced to at least five years in prison. An Australian judge called his crime “one of the most serious offenses of its kind to come before a court in this country.”

Though small compared with international banks, Euro Pacific is sizable for a Puerto Rico I.F.E. It has about 8,000 depositors, according to the company. It holds about $140 million in deposits, a decline of nearly $30 million since 2017.


Credit…Gabriella N. Baez for The New York Times

Euro Pacific is majority-owned by its chief executive, Mr. Anderson. Mr. Schiff holds a 45 percent stake, according to regulatory filings. Both declined repeated requests for interviews from The Times.

In an appearance with Australia’s “60 Minutes” at his home outside New York last month, Mr. Schiff said that “there have been some allegations” but that “all of the allegations are unfounded, and there’s no basis, in fact, for any of them.”

Through a spokesman, Mr. Schiff later said that the interview was “clearly designed to take the information I provided and use it out of context.”

Silver-haired and loquacious, Mr. Schiff, 57, runs several investment funds and has been a commentator on cable news shows for more than a decade, along with hosting a podcast. He is a son of Irwin A. Schiff, who spent more than a decade in jail for evading taxes and died five years ago while in federal custody.

Mr. Schiff founded Euro Pacific in 2011 in the lush Caribbean outpost of St. Vincent and the Grenadines. He promoted it as an alternative to the established banking system. In one 2011 interview, he promised to issue debit cards backed by individual holdings of gold and silver. In another, from 2014, he said that he had chosen St. Vincent because “you have secrecy, privacy and you have no tax.”

In its early years, Euro Pacific had poorly protected email and file storage programs, said John Ogilvie, the company’s former information technology director, who started in 2014. Mr. Anderson insisted on putting all personal and company passwords in a directory labeled “passwords” on his computer, in a file with “master password” in the title, he said.

“He was just not very careful,” Mr. Ogilvie said.

Mr. Ogilvie, 49, left the company in 2016. In an email to Mr. Schiff that August, he called Euro Pacific “the most unprofessional working environment I have ever had the displeasure in participating.”

By 2017, Mr. Schiff had relocated the firm, his $783 million asset management business and his own official residence to Puerto Rico, taking advantage of a law that permits Americans who move their companies there to reduce tax liability. Mr. Schiff said he wanted to move to Puerto Rico in part to make it easier for Euro Pacific to set up an account with the New York Fed.

Euro Pacific also reached deals with Bank of Montreal, NatWest of Britain and Perth Mint, an Australian precious metals dealer, to allow customers to easily transfer funds to it.


Credit…Hannah Mckay/Reuters

Oversight in Puerto Rico was light. The New York Fed does not regulate I.F.E.s, even ones that keep accounts with it. The Fed, a spokeswoman said, does not comment on individual account holders but requires them to provide an independent assessment of their compliance program and an updated know-your-customer questionnaire.

The firm’s day-to-day regulator is the Puerto Rico Office of the Commissioner of Financial Institutions. The office, which has just a handful of bank examiners, said it had yet to complete an examination of Euro Pacific.

Puerto Rico “has a robust legal and regulatory framework to prevent, detect and combat money laundering, terrorist financing and other illicit financial transactions,” said Víctor M. Rodríguez Bonilla, the office’s commissioner.

Puerto Rico also is not a signatory to the “common reporting standard,” which requires banks from more than 150 nations to report big deposits to the depositor’s home country to stop tax fraud and other crimes.

One company that markets Euro Pacific’s services to potential customers detailed those advantages explicitly.

That company, Amanda J. Molyneux & Company in London, which helps clients open offshore companies, wrote online a year ago about the benefits of Puerto Rico’s nonparticipation in the common reporting standard. In essence, said Richard Scott Carnell, a former Treasury Department official, Molyneux was selling Euro Pacific as a firm that will not tattle to tax authorities.

“They said the quiet part out loud,” said Mr. Carnell, adding, “It is unsavory.”


Credit…Hiroko Masuike/The New York Times

Mr. Kramer, the Euro Pacific spokesman, said the bank “did not endorse” the message from Molyneux. Third-party marketers like Molyneux, he said, receive $25 from Euro Pacific for every new customer they bring to the bank.

Charles Farran, a Molyneux managing director who had posted the message, said that he properly vetted all his customers and that the message to clients “was not made for any marketing process.” He added in a statement that the post was “merely a statement of fact and a matter of public record.”

After learning of the J5 investigation from a Times reporter, Mr. Farran said he “will now suspend any client application referrals to the bank.”

Others found the customer vetting process at Euro Pacific to be surprisingly light.

In 2017, a group of artists called the Demystification Committee began a project to show how easily money could be moved offshore anonymously. They set up a swimsuit line emblazoned with the logos of the companies they used to set up their offshore project — including Euro Pacific.

Francesco Tacchini, a member of the group, said he filled out a form in July 2017 to set up an account with Euro Pacific as part of the project. He had to state he was not a U.S. citizen and provide a copy of his passport identification page. But the follow-up phone interview with a Euro Pacific bank representative, he said, “felt like it was a formality.”


Credit…Demystification Committee

Even before the investigation, business has not always gone smoothly for Euro Pacific. It has been unable to strike deals with major credit card brands to issue cards that would allow customers to withdraw their money.

Today it emphasizes the security and technology it provides. Despite his popularity among tax opponents, Mr. Schiff is not mentioned in a 14-page presentation posted to the company’s website.

Four pages are dedicated to explaining how the bank “seeks to obtain a in-depth knowledge of each and every client.”

Alejandra Rosa contributed reporting.

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Owners of BitMEX, a Leading Bitcoin Exchange, Face Criminal Charges

American authorities brought criminal charges on Thursday against the owners of one of the world’s biggest cryptocurrency trading exchanges, BitMEX, accusing them of allowing the Hong Kong-based company to launder money and engage in other illegal transactions.

BitMEX is far from the first cryptocurrency company to be suspected of facilitating criminal activity. But it is the largest and most established exchange to face criminal charges.

Federal prosecutors in Manhattan indicted the chief executive of BitMEX, Arthur Hayes, and three co-owners: Benjamin Delo, Samuel Reed and Gregory Dwyer. Mr. Reed was arrested in Massachusetts on Thursday, while the other three men remained at large, authorities said.

Prosecutors said BitMEX had taken few steps to limit customers even after being informed that the exchange was being used by hackers to launder stolen money, and by people in countries under sanctions, like Iran.

“BitMEX made itself available as a vehicle for money laundering and sanctions violations,” the indictment released on Thursday said.

BitMEX has handled more than $1.5 billion of trades each day recently, making it one of the five biggest exchanges on most days. BitMEX and Mr. Hayes have been known for pushing the limits in the unregulated cryptocurrency industry.

After it was founded in 2014, BitMEX grew popular by allowing traders to buy and sell contracts tied to the value of Bitcoin — known as derivatives, or futures — with few of the restrictions and rules that were in place in other exchanges. That allowed investors to take out enormous loans and make risky trades.

The relaxed attitude also made it possible for people all over the world to easily move money in and out of BitMEX without the basic identity checks that can prevent money laundering. In August, BitMEX put in place some of those verification checks.

Mr. Hayes is from Buffalo, and previously worked as a trader at Deutsche Bank and Citi after graduating from the University of Pennsylvania. He incorporated BitMEX in the Seychelles even though its offices were in Hong Kong and New York.

Mr. Hayes chose Seychelles “because it cost less to bribe Seychellois authorities — just ‘a coconut’ — than it would cost to bribe regulators in the United States and elsewhere,” according to the indictment.

A spokesman for HDR Global Trading Limited, one of the corporate entities controlling BitMEX, said: “We strongly disagree with the U.S. government’s heavy-handed decision to bring these charges, and intend to defend the allegations vigorously.”

BitMEX has been reported to be under investigation by American authorities since last year. On Thursday, American cryptocurrency experts said they were not surprised that the exchange would attract scrutiny given its freewheeling attitude.

“The vast majority of firms that service the U.S. are compliant, so it’s not surprising that the government would now turn to those that refuse to follow the law,” said Jerry Brito, the executive director of Coin Center, a research and lobbying group in Washington.

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A Job That Isn’t Hard to Get in a Pandemic: Swindlers’ Unwitting Helper

After the fitness center where Denise Newton worked closed down in April because of the coronavirus, she posted her résumé online to look for a new job. She soon got a call from a company she had never heard of.

The woman who phoned from the company, Heies, invited Ms. Newton to apply for a job as a “local hub inspector.” When she started work in May, Ms. Newton began receiving boxes with Apple watches and laptops in them. Her job was to open the boxes, check the contents and then mail them off to foreign addresses.

But something was off. The boxes were suspiciously plain, even though they included brand-name products. The name on the labels was never Ms. Newton’s. When she asked questions, her new employer stopped responding. In June, she reported Heies to the Better Business Bureau.

It turned out that Ms. Newton had become what is known in security circles as a money mule, an accomplice who, either knowingly or unknowingly, helps international criminal rings move their ill-gotten gains. In Ms. Newton’s case, swindlers appeared to be buying products in the United States with stolen money and then mailing them — using unwitting intermediaries like her to disguise their involvement — to overseas locations where the goods could be resold for cash.

“They really caught me at the perfect time,” said Ms. Newton, 24, who was living with her parents in Birmingham, Ala. “I was just one of those desperate people looking for a job.”

Since the pandemic’s onset in March, the number of criminal schemes relying on money mules has spiked, just when many people have lost their jobs and are vulnerable to exploitation. The volume of schemes has been turbocharged partly by criminals going after enticing pots of money from the U.S. government — specifically, the benefit programs that were set up to help people and businesses hurt by the pandemic-induced economic downturn, the authorities said.

In total, online human resources schemes where criminals pose as potential employers have soared 295 percent from a year ago, while schemes used for money laundering have skyrocketed by 609 percent, according to the security firm ZeroFox.


Many people who perpetrate these frauds are based overseas, authorities said, so they need to move the money to their home country. Banks and authorities have made it harder to launder money through traditional financial channels in recent years. So these criminals are now increasingly on the hunt for a larger supply of potential money mules just as many newly unemployed people look for work.

“It is something that is escalating because of the current environment,” said Robert Villanueva, a former Secret Service agent who now works on cybercrime intelligence for the security firm Q6 Cyber. “It has become hard to avoid.”

Money mules are not new, and their numbers have risen alongside online fraud more broadly over the last two decades. Some people enter the business knowing it is illegal. Advertisements looking for money mules on the so-called dark net, an anonymous corner of the internet popular with criminals, often acknowledge the illegal aspect of the work.

“Hi. I need an excellent professional bank accounts loader for long term business,” read one ad from May, which was turned up by the dark net research firm Flashpoint.

Yet seven people who became money mules during the pandemic told The New York Times that they had no inkling of what their so-called employer was up to when they began the work. Many had recently lost their jobs and needed to pay the bills. To avoid exposure to the coronavirus, they were also looking for jobs to do from home, just what many swindlers want from a money mule.

Alma Sardas, 21, had been furloughed from her job at a hotel in Fort Worth this spring when she saw a listing on the jobs site ZipRecruiter advertising a work-from-home position as a “virtual assistant” to a businessman in Hong Kong.


Ms. Sardas sat through a formal interview and spoke with a man who called himself Hermann Ziegler, who said he would be her boss. Once she was hired, she was sent a check for $4,590 to deposit into her bank account. She was told to use some of the money for her expenses and to send the rest from her account to her new employer’s vendors.

Ms. Sardas became skeptical about why the money would need to go through her bank account and called the local police. They explained that she had almost been caught in a classic money-laundering scheme.

“You make yourself so sincere and these people just take advantage of it,” she said, adding that she had shredded the check and reported the incident to ZipRecruiter. ZipRecruiter said it removed the job posting immediately.

The schemes using money mules are varied. Some people who become mules are victims of online romance frauds who make bank and wire transfers for people they believe care about them. Others, like Ms. Sardas, are asked to use their own bank accounts to make financial transactions on behalf of their new employers. Ms. Newton became embroiled in what is known as a reshipping scheme, where the fraudsters buy goods with their stolen money and then use mules to get the products overseas, where they can be resold.

Some of these operations have become well-oiled machines. William Zackery, 64, a substitute teacher in Northern California, began working with a company called SFP Shippers in May. SFP Shippers appeared to have multiple departments, a website and a custom online dashboard that he had to log in to each day.

Mr. Zackery, who was out of work, was enlisted to receive packages with expensive purses and cameras. It was his job to print new labels and ship the goods on to other places across the country. Many mule operations use multiple shipping legs to cover their tracks, security experts said.

At first, he did not think anything was amiss. “I was getting calls two or three times a day from my so-called supervisors,” he said. But when the new employer stopped communicating, “I started doing some research that I should have done at the beginning.”

Mr. Zackery ultimately reported SFP Shippers to local and national authorities; the company’s website has been taken down.

Sometimes people’s identities are used without their knowledge. Over the last few months, Scattered Canary, a Nigerian criminal operation, submitted fraudulent claims for unemployment benefits in at least 14 states and then had the money delivered to accounts that they had set up, in the names of their victims, with Green Dot, a financial services company, according to the security firm Agari.

Scattered Canary then sent the money overseas through Green Dot’s online system, all before the person whose name was used was alerted to the new account, the security firm said.

Alison Lubert, a spokeswoman for Green Dot, said the company works “around the clock and invests heavily to identify, block and address fraudulent activity.”

Jamarle Worilds, the chief of the illicit finance unit of Homeland Security Investigations, a division of Immigration and Customs Enforcement, said many people who act as money mules “don’t actually understand that they are operating in the space.” He said he had recently received text messages offering him the opportunity to work from home, which he easily spotted as an effort to recruit him as a money mule.

“I’m not sure about how they got my information, but that’s what it’s come to,” he said.

In Ms. Newton’s case, the woman from Heies who called identified herself as Carla Neely. She told Ms. Newton that the company needed “hub inspectors” to move packages for customers. Ms. Newton was pointed to a company website and went through an interview and a formal human resources process before being hired.


“Congratulations! We were impressed with your interview and would like to extend you a conditional offer for the position of Local Hub Inspector at Heies,” Ms. Neely wrote to Ms. Newton in her hiring letter.

Apart from Apple Watches and laptops, Ms. Newton said, she was also sent odd items, including a pack of sponges and a garbage disposal.

By the time Ms. Newton reported Heies to the Better Business Bureau, the numbers and emails that the company had used were dead. Its website had also been taken down. The perpetrators, who have faced other online complaints, have not been caught.

“I feel scared that I have blood on my hands because I’m in the middle of a scam and I’m also in the middle of a pandemic,” Ms. Newton said. “They pretty much just took advantage of my vulnerability.”

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Deutsche Bank Settles Over Ignored Red Flags on Jeffrey Epstein

Payments to his alleged co-conspirators. Money wired to Russian models. A cash withdrawal of $100,000 for “tips and household expenses.”

When Jeffrey Epstein moved his money, Deutsche Bank didn’t ask many questions.

In a $150 million settlement to be announced on Tuesday, the New York Department of Financial Services said that Mr. Epstein, a convicted sex offender, engaged in suspicious transactions for years, even though Deutsche Bank had deemed him a “high risk” client from the moment he became a customer in summer 2013.

“Despite knowing Mr. Epstein’s terrible criminal history, the bank inexcusably failed to detect or prevent millions of dollars of suspicious transactions,” Linda A. Lacewell, the department’s superintendent, said in a statement.

A year and a day after Mr. Epstein was arrested on federal sex-trafficking charges, the settlement described how bank employees relied on informal meetings and institutional momentum to allow suspicious activity to proceed largely unchecked. Instead of performing appropriate due diligence on Mr. Epstein and the activity in his accounts, regulators wrote, the bank was focused on his potential to “generate millions of dollars of revenue as well as leads for other lucrative clients.”

Deutsche Bank acknowledged that it had erred in bringing Mr. Epstein on as a client and that its processes had been weak. “Our reputation is our most valuable asset and we deeply regret our association with Epstein,” a bank spokesman, Daniel Hunter, said in a statement.

In a message to employees on Tuesday, the bank’s chief executive, Christian Sewing, said taking Mr. Epstein on was a “critical mistake and should never have happened.” He urged them to read the settlement document and “learn the appropriate lessons” from the bank’s past conduct.

“We all have to help ensure that this kind of thing does not happen again,” Mr. Sewing wrote.

The settlement — the first regulatory action taken against a financial institution in connection with Mr. Epstein — provides a glimpse into the mysterious finances of the self-described tax guru and financial adviser.

According to regulators, Mr. Epstein, who killed himself in a jail cell in New York last year while awaiting trial, sent $2.65 million in 120 wire transfers through accounts established in the name of an entity called the Butterfly Trust. Some of those payments — as well as money from other accounts — went to three people who had been named as co-conspirators in suits by Mr. Epstein’s accusers that were related to his 2008 guilty plea to prostitution charges in Florida.

Regulators did not name the co-conspirators in the settlement document. The settlement, citing published reports over those suits, describes the first two as having invoked their Fifth Amendment rights and the third as having been accused of recruiting girls for Mr. Epstein.

Four women were named as potential co-conspirators in the nonprosecution agreement Mr. Epstein reached with federal prosecutors that led to his plea to state charges in 2008. Another woman — Ghislaine Maxwell, a longtime confidante and business associate of Mr. Epstein — was charged last week by federal prosecutors in Manhattan with helping him recruit and groom teenage girls he abused at his lavish residences in New York, Florida and New Mexico.

Upon his death, Mr. Epstein left behind an estate valued at more than $600 million that is the subject of litigation by the attorney general of the United States Virgin Islands, where Mr. Epstein had lived and worked for nearly two decades. The attorney general, Denise George, has sued the estate, alleging that a company Mr. Epstein established there, Southern Trust Company, was a sham operation that Mr. Epstein used to mislead the territory and receive a lucrative tax break.

It was Southern Trust — and a similarly named subsidiary, Southern Financial — that opened the first of Mr. Epstein’s accounts with Deutsche Bank in 2013. Over the next five years, Mr. Epstein, his related entities and his associates opened more than 40 accounts with the bank, the settlement said.

Credit…Stephanie Keith/Getty Images

Over the years, activities in those accounts were repeatedly questioned by Deutsche Bank employees, who were ignored by their superiors.

According to the settlement, an unnamed executive emailed the manager in charge of the relationship with Mr. Epstein in 2013, before any accounts were opened. The executive said he had spoken to two other top bank officials and neither had suggested that a relationship with Mr. Epstein required a risk review, and could move forward. In later years, bank officials frequently pointed to that email as a reason to keep him as a client, the settlement said.

In 2015, after a specialist in the anti-money-laundering department raised concerns about the bank’s continued relationship with Mr. Epstein, a department manager and the executive who wrote the email two years earlier met with Mr. Epstein at his Manhattan townhouse to discuss new allegations of abuse contained in civil suits. The settlement said bank officials “appeared to be satisfied by Mr. Epstein’s response” and the relationship continued.

And when the bank later set conditions for monitoring Mr. Epstein’s activity, the settlement said, they were poorly communicated, creating confusion. Anti-money-laundering specialists interpreted the guidance to mean that unusual activity should be flagged only if it was unusual for Mr. Epstein — which led to an alert about payments to a Russian model and a Russian publicity agent being dismissed because the transactions were “normal for this client,” according to an email cited in the settlement.

At the end of 2018 — after The Miami Herald published details of Mr. Epstein’s nonprosecution agreement with federal prosecutors from a decade earlier — the bank decided it could no longer keep Mr. Epstein as a client. But an unnamed bank employee who managed the institution’s relationship with him still drafted reference letters to send to other banks, on Deutsche Bank letterhead, according to the settlement.

“Banks are the first line of defense with respect to preventing the facilitation of crime through the financial system, and it is fundamental that banks tailor the monitoring of their customers’ activity based upon the types of risk that are posed by a particular customer,” said Ms. Lacewell, the regulator’s superintendent.

The settlement on Tuesday also covered compliance failures unrelated to Mr. Epstein. The department found that Deutsche Bank had not properly monitored transactions with Danske Bank Estonia and FBME Bank, a Tanzanian institution. As part of the agreement, Deutsche Bank promised to continue its work with an independent monitor — in place since 2017 — to improve its compliance systems.

While the settlement described a long list of missteps by Deutsche Bank, it praised the bank for its “exemplary cooperation.” It also said the bank had cut ties with other high-risk clients.

In a statement, the bank said it has invested nearly $1 billion in training and oversight, and had beefed up its anti-financial crime division.

“It is our duty and our social responsibility to ensure that our banking services are used only for legitimate purposes,” Mr. Sewing said in his message to employees. “That’s exactly why we should always examine things critically, ask questions and speak up.”

The settlement is just the latest black eye for Deutsche Bank over legal and regulatory mistakes. Those include punishments by federal and state regulators, as well as the British authorities, for failing to stop Russian money laundering. And in 2015, Deutsche Bank agreed to pay $2.5 billion in penalties to settle accusations that it had manipulated the London interbank offered rate, or Libor.

Deutsche Bank has also attracted scrutiny for its relationship with President Trump and his family. It has been the long-running lender for Mr. Trump and has been the target of subpoenas from congressional investigators and state prosecutors.

Some of the payments Mr. Epstein made from his Deutsche Bank accounts were “inherently suspicious,” regulators wrote. Those included multiple settlement payments totaling more than $7 million and payments totaling more than $6 million for what regulators said appeared to be legal expenses for himself and for people the settlement identified as co-conspirators.

Other transactions — even if harmless — should have raised alarms, regulators wrote.

One of Mr. Epstein’s personal lawyers made $800,000 in withdrawals for Mr. Epstein over a four-year period. Regulators said the bank never got a good explanation for those withdrawals, except that Mr. Epstein needed the money for travel, expenses and paying tips.

According to the settlement, the unnamed lawyer twice asked bank officials how much money could be withdrawn without triggering some kind of alert. Suspicious that he was attempting to circumvent federal regulations that require cash transactions of $10,000 or more to be reported to the government, bank employees spoke to the lawyer.

The settlement said the lawyer denied trying to avoid such a report, and bank officials allowed him to continue making withdrawals on Mr. Epstein’s behalf — including taking out $100,000 at a branch on Park Avenue, not far from Mr. Epstein’s townhouse.

David Enrich contributed reporting.

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Regulators May Punish Deutsche Bank for Its Jeffrey Epstein Ties

Banking regulators have spent months investigating Jeffrey Epstein’s dealings with Deutsche Bank, which lent money to the disgraced financier and held dozens of accounts for him until shortly before he died, according to four people briefed on the matter but not authorized to speak publicly.

The investigation by the New York Department of Financial Services, which has not been previously reported, could result in an enforcement action against Deutsche Bank as soon as this month, before the first anniversary of Mr. Epstein’s arrest on federal sex-trafficking charges, the people said. Mr. Epstein was arrested on July 6 and died in federal custody in August; his death was ruled a suicide.

The investigation focuses, at least in part, on the bank’s decision to continue doing business with Mr. Epstein even after employees raised concerns, according to the people. Compliance officers in the bank’s anti-money-laundering operation alerted the federal government to several transactions in which Mr. Epstein sent money overseas in 2015, while employees worried about the reputational risks of doing business with a registered sex offender. Ultimately, senior bank executives opted to maintain the relationship with Mr. Epstein because it was so lucrative.

In addition to setting up dozens of accounts for Mr. Epstein, Deutsche Bank served as his lender from 2013 until last year, even as other banks considered him off-limits. Deutsche Bank began extricating itself from its relationship with Mr. Epstein in late 2018, after a series of articles in The Miami Herald examined the secret nonprosecution agreement federal prosecutors reached with him in 2007. Deutsche Bank told Mr. Epstein he had six months to move his money out of the bank.

Daniel Hunter, a Deutsche Bank spokesman, said the bank regarded its reputation as its “most precious asset.”

“We regret the decision to associate with Epstein,” he said.

After Mr. Epstein was arrested last July, Deutsche Bank executives began an internal investigation into the bank’s relationship with him. The examination includes studying how Mr. Epstein used his accounts and the bank’s decision to keep him as a client, even as other banks had distanced themselves from him.

Bank officials have been sharing their findings with New York regulators, according to the people briefed on the matter. The Department of Financial Services wields significant power over Deutsche Bank because the agency licenses it to operate in the state, where the bank has most of its U.S. operations.

If state regulators decide to punish Deutsche Bank, it would be the latest in a series of black eyes for the bank. Federal and state authorities in recent years have imposed billions of dollars of fines on the German bank for failing to stop money laundering and for violating sanctions, among other things. The bank also has been under scrutiny by congressional Democrats and state prosecutors for its role as the longtime banker to President Trump, his family and his companies.

An enforcement action against Deutsche Bank would be the first taken by regulators against any of the banks that Mr. Epstein used to handle his money as he built a fortune of more than $600 million, according to court filings by his estate. But other financial institutions and bankers are also being scrutinized by government officials in the United States and abroad.

The attorney general for the United States Virgin Islands, Denise George, subpoenaed years of records from First Bank, a Puerto Rico-based lender that had provided banking services to Mr. Epstein for nearly two decades, according two people briefed on that investigation but not authorized to speak publicly. In January, Ms. George’s office filed a civil forfeiture lawsuit against Mr. Epstein’s estate, in which she contends that Mr. Epstein misled government officials there for nearly two decades and used a private island hideaway to engage in sex trafficking.

Ms. George is also looking into millions of dollars of transactions conducted last year — both before and after Mr. Epstein’s death — at a little-known bank that he had established in the Virgin Islands called Southern Country International.

And bank regulators in Britain are looking into whether James E. Staley was transparent about the details of his relationship with Mr. Epstein when describing it to officials at Barclays, where Mr. Staley became chief executive in 2015. Barclays has stood behind Mr. Staley, who has said he had no contact with Mr. Epstein after 2015.

Before joining Barclays, Mr. Staley was a senior executive at JPMorgan Chase, where he helped cultivate that bank’s relationship with Mr. Epstein.

JPMorgan was Mr. Epstein’s primary bank for more than a decade, but some bank officials became uneasy about doing business with him after his 2008 guilty plea to soliciting prostitution from a minor in Florida. JPMorgan cut ties with Mr. Epstein after Mr. Staley left the bank in 2013.

That is when Mr. Epstein began working with Deutsche Bank. Paul Morris, a private banker who had recently arrived at the German bank from JPMorgan, brought Mr. Epstein on as a client, according to two of the people briefed on the matter. Mr. Morris, who left Deutsche Bank for another firm in 2016, did not respond to requests for comment.

The investigation could provide a rare glimpse into Mr. Epstein’s mysterious finances.

Mr. Epstein made a significant portion of his fortune while banking with Deutsche Bank, even though his criminal record had cost him his most lucrative client, Leslie Wexner, the billionaire retail magnate who built Victoria’s Secret into a household name. Mr. Wexner gave Mr. Epstein a sweeping power of attorney to manage all aspects of his financial affairs, but said he severed all ties with Mr. Epstein shortly before his guilty plea.

While Mr. Epstein was a client of Deutsche Bank, his main business was Southern Trust Company, which generated more than $250 million in revenues during its existence, according to public records. Mr. Epstein created the company in 2013 and told government officials in the Virgin Islands that it was involved in DNA analysis and research.

Ms. George, in her civil forfeiture lawsuit, contends that Southern Trust was not in the business it claimed to be and that Mr. Epstein misled government officials in order to win a lucrative tax break. She told The New York Times in March that her office had not yet determined the kind of business Southern Trust was in.

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What to Expect From White-Collar Prosecutions in 2020

The new year promises to be an interesting one in white-collar crime.

Goldman Sachs is negotiating with the Justice Department to pay a penalty of about $2 billion for its role in the 1Malaysia Development Berhad scandal, known as 1MDB.

Accounting fraud became a particular focus of the Justice Department toward the end of 2019. In December, federal prosecutors indicted executives from Outcome Health and MiMed, and opened an investigation into whether BMW, the German automaker, manipulated its sales figures. Here’s a look:

The Malaysian authorities have indicted 17 Goldman Sachs executives on allegations that they played roles in siphoning off about $2.7 billion of the $6.5 billion raised for the 1MDB fund. How that case will be resolved is an open question because the Malaysian authorities are looking to recoup all of the money raised on behalf of 1MDB.

In the United States, federal prosecutors are looking at possible money-laundering and Foreign Corrupt Practices Act violations by Goldman. A settlement could include a guilty plea by its Asian subsidiary, which Goldman would then most likely put out of business.

Any settlement Goldman reaches with the federal authorities is unlikely to hamstring the bank. The Securities and Exchange Commission has shown a willingness to waive its “bad actor” rules, which bar financial institutions from offering securities to the public. And the large fines and guilty pleas that Citigroup, JPMorgan Chase, Barclays, Royal Bank of Scotland and UBS agreed to in 2015 for manipulating foreign currencies did not cripple those banks.

Any settlement with the Justice Department and the S.E.C. is likely to require Goldman to have an outside monitor to ensure that it did not violate securities laws in the future. But that would most likely be just another cost of doing business for the firm, which would certainly be able to survive any issue arising from the monitoring.

Criminal prosecutions for accounting fraud are uncommon, but late last year, prosecutors took a much more aggressive position in accusing senior executives of violating accounting rules.

In December, federal prosecutors indicted a co-founder of Outcome Health, Rishi Shah; the company’s former president, Shradha Agarwal; and its chief financial officer, Brad Purdy, of money laundering and mail and wire fraud for making false statements to a bank to obtain almost $1 billion in loans and equity investments.

The Justice Department also charged the former MiMedx executives Praker Petit and William Taylor of “channel stuffing” by selling more products to distributors than they needed, to “juice” corporate sales. According to the indictment, MiMedx “did not meet the low end of its revenue guidance until the very last day of the quarter in each of the four quarters of 2015.” That is sure to arouse suspicions about whether the sales were legitimate.

If federal prosecutors can convince a jury that the defendants violated the securities law, substantial prison terms are likely.

The issue for BMW will be whether its reporting of vehicle sales also misled investors. The S.E.C. is investigating whether the company manipulated figures to make it appear healthier than it was. If it is found to have done so, the company could face a substantial penalty.

In September, Fiat Chrysler paid $40 million to settle claims that it used dubious practices to inflate its sales. The S.E.C. concluded that Fiat Chrysler had provided inaccurate information to investors, in violation of federal securities laws.

The House of Representatives passed the Insider Trading Prohibition Act, which for the first time would specifically define what constituted insider trading and expand what could be prosecuted.

If Senate approval follows and the legislation becomes law, any person “while aware of material, nonpublic information relating” to a company could be considered liable for insider trading. Communicating confidential information to others, the tippees, would be prohibited so long as the information “would reasonably be expected to have a material effect on the market price” of any security.

The legislation also covers obtaining information by “theft, bribery, misrepresentation or espionage” along with any “conversion, misappropriation, or other unauthorized and deceptive taking of such information.” That would subject many means of obtaining confidential information to the new prohibition on insider trading.

Providing a definition would be a substantial step forward for insider trading prosecution because prosecutors have had to rely on the courts to define what is — and is not — insider trading. We’d be likely to see an expansion of what types of conduct could be subject to prosecution. Whether that is a good thing remains to be seen.

Even if the legislation is not adopted, a ruling at the end of 2019 will make it easier for the Justice Department to pursue insider-trading cases.

A federal appeals court upheld the insider-trading convictions in United States v. Blaszczak. The court found that a securities fraud statute added to the Dodd-Frank Act does not require prosecutors to prove that the tipper received a personal benefit from the tippee. This is likely to allow prosecutors to pursue more cases that involve trading on confidential information without requiring proof that there was a quid pro quo exchange.

Whether that, too, is a good thing also remains to be seen.


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