US in sanctions talks with Commerzbank and Deutsche

US authorities have begun settlement talks with Germany's Commerzbank and Deutsche Bank over their dealings with countries blacklisted by the United States, extending a crackdown on European banks at a delicate point in US-German relations.

The talks with state and federal authorities have just begun, a source with direct knowledge of the regulatory investigations told Reuters, and the timing of a deal is unclear.

Deutsche Bank and Commerzbank declined to comment.

Washington has come down hard on European banks that have evaded their sanctions, imposing a record fine on France’s BNP Paribas last week and stoking resentment among bankers and officials at what they see as US imperialism.

Commerzbank, Germany’s second-largest lender, is 17 per cent owned by the German government, and the settlement talks could further strain ties between Berlin and Washington, already at a low ebb due to allegations that a German man had worked as a double agent for US intelligence.

Commerzbank is accused by US authorities of transferring money through its US operations on behalf of companies in Iran and Sudan and could pay at least $500 million in penalties, according to the New York Times.

The newspaper said a deal could be struck as soon as this summer and could pave the way for an agreement with Deutsche Bank.

Commerzbank would likely face a so-called deferred prosecution agreement that would suspend criminal charges in exchange for the financial penalty and other concessions, the report said.

In its last public comments on the matter in March, Commerzbank said it faced the threat of substantial fines or settlement costs. US authorities had already forced it to surrender documents and the results of internal investigations, Commerzbank said then.

“The bank cannot rule out the possibility that it will pay a considerable sum of money in order to settle the case,” Commerzbank said in its annual report.

Deutsche Bank, which has already paid over €5 billion in fines and settlements in the past two years, said in June it had done nothing wrong in its Iran dealings.

Germany’s largest lender stopped doing new business with Iran in 2007 but remains engaged in several long-term loans or financial arrangements, some of which conclude in 2019, Deutsche said in the prospectus for a rights issue.

“We do not believe we have engaged in activities sanctionable under these statutes, but the US authorities have considerable discretion in applying the statutes and any imposition of sanctions could be material,” the bank said.

Reuters