It is part of the canon of duties of every bank, and last but not least the Russia sanctions show again how important this exercise is: “Know your customers” or “Know your client”, abbreviated “KYC”, is the name of the requirement for financial institutions to their customers X-ray. If that doesn’t work, i.e. if a bank with sanctioned oligarchs is caught as a customer, there are high penalties. No wonder bankers jokingly translate “KYC” as “Kill your Career”; it can cost bankers their career if they accidentally help a criminal with financial transactions.
However, Commerzbank still has some catching up to do in this area. According to SZ information, significant shortcomings in customer identification have recently emerged at the bank. In concrete terms, the money house is said to be lagging behind in the necessary regular revision of customer files. There is talk of a higher six-digit number of files that were not updated in good time. The problem is said to have arisen in 2019 in the direct bank subsidiary Comdirect, but also extends to Commerzbank. Risk director Marcus Chromik is currently negotiating with the financial regulator Bafin regarding the consequences, said an insider. It cannot be ruled out that Commerzbank will have to pay a fine, which is why the matter is also unpleasant for the new group boss Manfred Knof.
Actually, Commerzbank should have had such issues under control long ago. The money house had violated Iran sanctions a few years ago, not only paid an enormous 1.45 billion dollars for this in 2015 as part of a settlement with the US authorities, but also had to accept the use of a watchdog, an external law firm, at its own expense. This “monitor” should help the bank to check the systems, especially with regard to money laundering, terrorist financing as well as sanctions and embargoes. In 2019, the law firm finished the work, “all tasks and points were completed,” it said at the time.
Apparently not quite. Commerzbank confirmed the problems, saying that “the independent subsidiary Comdirect had a backlog of updates due to process-related reasons,” a spokeswoman said. This was quickly dissolved after the integration of Comdirect into Commerzbank. This post-processing is now almost complete. The financial regulator Bafin did not want to comment. The former Commerzbank manager Birgit Rodolphe has recently been responsible for preventing money laundering. A spokeswoman for the Bonn authority said she was not involved in decisions about Commerzbank.
Commerzbank boss Knof is confident despite the war
Deutsche Bank has also repeatedly had problems updating its customer files in recent years – which is why the bank’s Bafin also sent a monitor to the house in 2018. Its use was even extended again last summer. As early as 2019, Deutsche Bank had to sort out thousands of particularly risky customers because it was unable to update the files in good time. Since then, Deutsche Bank has repeatedly promised improvements. Recently, about the responsibilities rearranged in the area.
Commerzbank boss Knof is meanwhile still confident about the core business of the bank. He even announced it last week higher profit targets “because of the strong customer business”. The commitment in Russia is manageable and has already been significantly reduced in the past. Knof also promised shareholders a higher dividend and share buybacks – an astonishing statement in view of the Ukraine war and the numerous risks associated with it for the economy. The calls to the stock market therefore faded away completely: in the wake of other bank stocks, the Commerzbank stocks also lost massively in value – even more than the leading index Dax.