(Clarifies context of quote in paras 11-13 with reference to
By Thomas Atkins and Alexander Hübner
FRANKFURT, July 8 U.S. 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 U.S.-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
Deutsche Bank and Commerzbank declined
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 U.S. imperialism.
Commerzbank, Germany's second-largest lender, is 17 percent
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 U.S. intelligence.
Commerzbank is accused by U.S. authorities of transferring
money through its U.S. 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
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
In its last public comments on the matter in March,
Commerzbank said it faced the threat of substantial U.S. fines
or settlement costs. U.S. 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 has said it stopped doing new business with
Iran in 2007.
But in the bank's public reporting under the Iran Threat
Reduction and Syria Human Rights Act of 2012, Germany's largest
lender said it remained engaged in several long-term loans or
In the report, Deutsche said, "We do not believe we have
engaged in activities sanctionable under these statutes, but the
U.S. authorities have considerable discretion in applying the
statutes and any imposition of sanctions against us could be
The risk of a fresh wave of U.S. fines weighed on European
stock markets, with Commerzbank down more than 5 percent and
Deutsche more than 2 percent.
"It's certainly a negative surprise, even if the market
wasn't left unprepared following the fines at BNP," said Philipp
Haessler, analyst at brokerage Equinet in Frankfurt.
Reuters reported last week that Deutsche Bank, Banamex USA,
which is the U.S. arm of Citigroup Inc's Mexican banking
group Banamex, and two major French banks - Credit Agricole
and Societe Generale, were among those being
investigated by U.S. authorities for possible money laundering
or sanctions violations.
Investigations into the two French banks are not expected to
be completed until after a settlement with Commerzbank, the
source told Reuters.
After failing to land high-profile criminal cases stemming
from the 2008-09 financial crisis, U.S. authorities have focused
on other types of criminal activity within the financial
industry, including money laundering, tax evasion and sanctions
Analysts at investment bank Morgan Stanley say more pain is
in store, saying banks have already paid $210 billion in fines
in the past four years and expects another $75 billion in the
coming three years.
Last week, France's largest bank BNP Paribas pleaded guilty
to two criminal charges, agreed to pay $8.9 billion and have its
right to clear certain dollar transactions suspended in order to
resolve accusations it violated U.S. sanctions against Sudan,
Cuba and Iran.
The size of the fine, the highest ever imposed for sanctions
violations, and the suspension have caused concern in Europe and
Asia that U.S. authorities are exploiting the dominance of the
U.S. dollar to impose their own rules and standards on foreign
firms and jurisdictions.
European concerns about heavy-handed U.S. sanctions have
already reached the highest levels of diplomacy, with French
President Francois Hollande in June raising the issue during a
state visit by U.S. President Barack Obama.
Reuters could not immediately reach the authorities
conducting the investigations - the U.S. Department of Justice,
New York State's banking regulator and the Manhattan district
Commerzbank had 934 million euros ($1.27 billion) at the end
of 2013 as provision for litigation risks, including a possible
U.S. probe into whether the bank breached sanctions.
Numerous other banks, including Standard Chartered,
Lloyds Banking Group and Credit Suisse Group
have previously settled with U.S. authorities over allegations
they violated sanctions, but their fines pale in comparison to
the near $9 billion penalty imposed on BNP Paribas.
U.S. authorities said the size of the BNP fine reflected the
extent of the wrongdoing. BNP employees concealed more than $190
billion in transactions between 2002 and 2012 for companies,
governments and people in Sudan, Iran and Cuba.
($1 = 0.7345 Euros)
(Additional reporting by Supriya Kurane in Bangalore, Karen
Freifeld in New York and Till Weber in Frankfurt; Writing by
Carmel Crimmins; Editing by Gopakumar Warrier, Anna Willard and