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 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. 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.

Sebastian Kraemer-Bach, a bank spokesman, said that Deutsche Bank conducted due diligence on the sale and didn’t find any evidence that it would violate anti-money-laundering laws or sanctions.

By Charlie Savage and David Enrich, The New York Times, 31 October 2019

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