Deutsche Bank was already under federal investigation for helping wealthy Russians launder money when it struck a deal last year to sell a property it co-owned in California.
The $72 million sale of an office complex might not have been notable, except for one thing: The purchaser was linked to the son of a former top Kremlin official.
The German bank was facing multiple money laundering investigations as well as political scrutiny over its ties to President Trump. Against that backdrop, bank executives in the United States raised objections about the proposed transaction, warning that while not illegal, it could further damage the bank’s reputation. Executives in the bank’s Frankfurt headquarters decided to go forward with it anyway.
After the sale went through, Deutsche Bank officials in the United States took the rare step of contacting the federal watchdog that polices financial crimes to report the bank’s own transaction as suspicious, according to three people briefed on the matter who were not authorized to speak publicly.
So-called suspicious activity reports are common — banks file thousands of them a year to flag potentially troubling money transfers and other transactions to the government. But they generally involve activities conducted by banks’ customers or even their customers’ customers, not the banks themselves.
Deutsche Bank recently contacted regulators in the United States and overseas to explain the Menlo Park transaction, the three people said.
An investment fund run by the bank’s asset-management division bought a 50 percent stake in the low-slung office complex on Willow Road in Menlo Park in 2016. (The other half was owned by Embarcadero Capital Partners, a real estate firm.) Deutsche Bank at the time heralded the site’s proximity to Palo Alto and Stanford University as key selling points.
The bank, however, was in severe financial distress and under pressure to shrink quickly — circumstances that led it earlier this year to sell billions of dollars in assets and lay off thousands of workers.
The Deutsche Bank investment fund agreed to sell the office complex to a limited liability company called Willow Project, the people said. Some bank officials worried about the problematic appearance of doing business with a company they believed was owned by Vitaly Yusufov, the son of the former energy minister under President Vladimir V. Putin of Russia.
A committee of Deutsche Bank executives in New York tried to block the transaction, citing the potential damage it could inflict on the bank’s reputation, according to the people. That committee did not voice concerns about the transaction being illegal. The decision was appealed to Europe, where another committee gave the green light.
Later, bank officials in the United States filed a suspicious activity report about the transaction to the Treasury Department’s Financial Crimes Enforcement Network.
Deutsche Bank has faced criticism for years for not doing enough to prevent money laundering. In early 2017, federal regulators punished it for a vast Russian money-laundering scheme meant to convert illicit gains into dollars and other widely used currencies. The bank remains under federal criminal investigation for that matter and others, The New York Times has previously reported.
Deutsche Bank’s handling of suspicious activity reports has been a particular source of criticism. In recent years, compliance officers flagged potentially problematic transactions linked to people including Mr. Trump and his son-in-law Jared Kushner. Bank officials in some cases rebuffed the compliance officers’ recommendations to file such reports, The Times previously reported.
Starting in the late 1990s, Deutsche Bank was the only mainstream financial institution consistently willing to lend money to Mr. Trump and his companies. The bank’s relationship with Mr. Trump is under investigation by two congressional committees.
Emily Flitter contributed reporting.
