Almost every weekday between the fall of 2011 and early 2015, a Russian broker named Igor Volkov called the equities desk of Deutsche Bank’s Moscow headquarters. Volkov would speak to a sales trader—often, a young woman named Dina Maksutova—and ask her to place two trades simultaneously. In one, he would use Russian rubles to buy a blue-chip Russian stock, such as Lukoil, for a Russian company that he represented. Usually, the order was for about ten million dollars’ worth of the stock. In the second trade, Volkov—acting on behalf of a different company, which typically was registered in an offshore territory, such as the British Virgin Islands—would sell the same Russian stock, in the same quantity, in London, in exchange for dollars, pounds, or euros. Both the Russian company and the offshore company had the same owner. Deutsche Bank was helping the client to buy and sell to himself.
At first glance, the trades appeared banal, even pointless. Deutsche Bank earned a small commission for executing the buy and sell orders, but in financial terms the clients finished roughly where they began. To inspect the trades individually, however, was like standing too close to an Impressionist painting—you saw the brushstrokes and missed the lilies. These transactions had nothing to do with pursuing profit. They were a way to expatriate money. Because the Russian company and the offshore company both belonged to the same owner, these ordinary-seeming trades had an alchemical purpose: to turn rubles that were stuck in Russia into dollars stashed outside Russia. On the Moscow markets, this sleight of hand had a nickname: konvert, which means “envelope” and echoes the English verb “convert.” In the English-language media, the scheme has become known as “mirror trading.”
Mirror trades are not inherently illegal. The purpose of an equities desk at an investment bank is to help approved clients buy and sell stock, and there could be legitimate reasons for making a simultaneous trade. A client might want to benefit, say, from the difference between the local and the foreign price of a stock. Indeed, because the individual transactions involved in mirror trades did not directly contravene any regulations, some employees who worked at Deutsche Bank’s Russian headquarters at the time deny that such activity was improper. (Fourteen former and current employees of Deutsche Bank in Moscow spoke to me about the mirror trades, as did several people involved with the clients. Most of them asked not to be named, either because they had signed nondisclosure agreements or because they still work in banking.)
Viewed with detachment, however, repeated mirror trades suggest a sustained plot to shift and hide money of possibly dubious origin. Deutsche Bank’s actions are now under investigation by the U.S. Department of Justice, the New York State Department of Financial Services, and financial regulators in the U.K. and in Germany. In an internal report, Deutsche Bank has admitted that, until April, 2015, when three members of its Russian equities desk were suspended for their role in the mirror trades, about ten billion dollars was spirited out of Russia through the scheme. The lingering question is whose money was moved, and why.
Deutsche Bank is an unwieldy institution with headquarters in Frankfurt and about a hundred thousand employees in seventy countries. When it was founded, in 1870, its stated purpose was to facilitate trade between Germany and other countries. It soon established footholds in Shanghai, London, and Buenos Aires. In 1881, the bank arrived in Russia, financing railways commissioned by Alexander III. It has operated there ever since.
During the Nazi era, Deutsche Bank sullied its reputation by financing Hitler’s regime and purchasing stolen Jewish gold. After the war, the bank concentrated on its domestic market, playing a significant role in Germany’s so-called economic miracle, in which the country regained its position as the most potent state in Europe. After the deregulation of the U.S. and U.K. financial markets, in the nineteen-eighties, Deutsche Bank refreshed its overseas ambitions, acquiring prominent investment banks: the London firm Morgan Grenfell, in 1989, and the American firm Bankers Trust, in 1998. By the new millennium, Deutsche Bank had become one of the world’s ten largest banks. In October, 2001, it débuted on the New York Stock Exchange.
Although the bank’s headquarters remained in Germany, power migrated from conservative Frankfurt to London, the investment-banking hub where the most lavish profits were generated. The assimilation of different banking cultures was not always successful. In the nineties, when hundreds of Americans went to work for Deutsche Bank in London, German managers had to place a sign in the entrance hall spelling out “Deutsche” phonetically, because many Americans called their employer “Douche Bank.”
In 2007, the bank’s share price hit an all-time peak: a hundred and fifty-nine dollars. But as it grew fast it also grew loose. Before the housing market collapsed in the United States, in 2008, sparking a global financial crisis, Deutsche Bank created about thirty-two billion dollars’ worth of collateralized debt obligations, which helped to inflate the housing bubble. In 2010, Deutsche Bank’s own staff accused it of having masked twelve billion dollars’ worth of losses. Eric Ben-Artzi, a former risk analyst, was one of three whistle-blowers. He told the Securities and Exchange Commission that, had the bank’s true financial health been known in 2008, it might have folded, as Lehman Brothers had. Last year, Deutsche Bank paid the S.E.C. a fifty-five-million-dollar fine but admitted no wrongdoing. Ben-Artzi told me that bank executives had incurred a tiny penalty for a huge crime. “There was cultural criminality,” he said. “Deutsche Bank was structurally designed by management to allow corrupt individuals to commit fraud.”
Scandals have proliferated at Deutsche Bank. Since 2008, it has paid more than nine billion dollars in fines and settlements for such improprieties as conspiring to manipulate the price of gold and silver, defrauding mortgage companies, and violating U.S. sanctions by trading in Iran, Syria, Libya, Myanmar, and Sudan. Last year, Deutsche Bank was ordered to pay regulators in the U.S. and the U.K. two and a half billion dollars, and to dismiss seven employees, for its role in manipulating the London Interbank Offered Rate, or libor, which is the interest rate banks charge one another. The Financial Conduct Authority, in Britain, chastised Deutsche Bank not only for its manipulation of libor but also for its subsequent lack of candor. “Deutsche Bank’s failings were compounded by them repeatedly misleading us,” Georgina Philippou, of the F.C.A., declared. “The bank took far too long to produce vital documents and it moved far too slowly to fix relevant systems.”
In April, 2015, the mirror-trades scheme unravelled. After a two-month internal investigation, the three Deutsche Bank employees were suspended. One was Tim Wiswell, a thirty-seven-year-old American who was then the head of Russian equities at the bank. The others were Russian sales traders on the equities desk: Dina Maksutova and Georgiy Buznik. Afterward, Bloomberg News suggested that some of the money diverted through mirror trades belonged to Igor Putin, a cousin of the Russian President, and to Arkady and Boris Rotenberg. The Rotenberg brothers own Russia’s largest construction company, S.G.M., and are old friends of Vladimir Putin. They are on the U.S. government’s list of sanctioned Russians, which was compiled in response to Putin’s aggression in Ukraine. According to the U.S. Treasury, the Rotenbergs have “made billions of dollars in contracts” that were awarded to their company by the Russian state, often without a transparent bidding process. (Last year, S.G.M. was awarded a contract worth $5.8 billion to build a twelve-mile bridge between Russia and Crimea.)
In June, 2015, with pressure from shareholders intensifying over the mirror trades and other scandals, the co-C.E.O.s of Deutsche Bank, Anshu Jain and Jürgen Fitschen, announced that they would resign. They were replaced by John Cryan, whose remit was to clean up the bank. That September, he announced the impending close of all investment-banking activity in Russia. When the Moscow investment bank shut down, in March, the remaining employees threw a “going out of business” dinner at a restaurant near the office. By the end of the evening, bankers were dancing on the bar.
Many current and former employees of Deutsche Bank cannot quite comprehend how the equities desk in a minor financial outpost came to taint the entire institution. The ostensible function of the Moscow desk was straightforward: it bought and sold stock for approved corporate clients—mutual funds, brokerages, hedge funds, and the like. The desk had about twenty employees, and included researchers, who analyzed financial data; sales traders, who took calls from clients about buy and sell orders; and traders, who executed the orders.