German financial watchdog: AI is helping to catch market abuse
BaFin President Mark Branson said the supervisor had started using artificial intelligence last year in its alert and market analysis system.
"We can already see from this that the results of this analysis system have become more accurate," Branson said at a conference.
"The chances of being caught in market abuse trading have never been so high, and here in Germany we know that the penalties for this can also be considerably high," he warned.
BaFin under Branson has been trying to burnish its reputation after the fall of Wirecard, a former blue-chip hailed as a German success story and once worth $28 billion.
The supervisor failed to spot accounting fraud at Wirecard ahead of its collapse in 2020, resulting in an effort to give BaFin "more bite" with a change in top leadership and more powers to spot and investigate wrongdoing.
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FRANKFURT, Aug 20 (Reuters) - In 2013, Deutsche Bank ( opens new tab handed Christian Sewing, a rising star, the sensitive assignment of investigating derivatives trades under scrutiny in Italy. More than a decade later, Sewing, now CEO, faces criticism in a lawsuit by a former Deutsche employee over his handling of the task. The suit has prompted Deutsche to review how the bank and Sewing, chief auditor at the time, managed the situation, according to a person with knowledge of the matter. Dario Schiraldi, a former banker at Deutsche who was involved in the trades, claims in a 152-million-euro ($178 million) lawsuit seeking damages from the bank that the lender's actions, including the audit overseen by Sewing more than a decade ago, harmed Schiraldi's reputation and earnings, according to court documents seen by Reuters. Deutsche Bank in its review in recent months of its investigation into the trades found no wrongdoing, the person familiar with the matter said. 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Deutsche Bank disclosed Schiraldi's lawsuit in its 2024 annual report released earlier this year, in a list of potentially significant civil litigation and regulatory matters. "The facts of this long-standing matter are well known and have been discussed in detail over the past decade. The Supervisory Board supports the Management Board in defending the bank against this litigation," Chairman Alexander Wynaendts said in a statement earlier this month. Sewing declined to comment for this story via a spokesperson. As CEO, he has slimmed down and returned Deutsche Bank to profit and restored its image after years of management churn, legal turmoil, losses and fines that threatened to topple the bank. He was reappointed in March for a third term as head of Deutsche, which is playing a key role in German Chancellor Friedrich Merz's "Made For Germany" initiative to pump the sagging economy. For this report, Reuters reviewed documents - including previously unreported details from the initial lawsuit, a March filing and email correspondence - and spoke to four people with direct knowledge of the matter on condition of anonymity. Reuters is reporting for the first time fresh details of the case, having reviewed Schiraldi's claim, and how Germany's largest bank is responding. Schiraldi, since leaving the bank, has held other jobs in finance, including leading a Swiss-family investment company, according to his LinkedIn profile. A central plank of Schiraldi's lawyers' argument is that Sewing and the bank scapegoated Schiraldi and a handful of colleagues and later failed to set the record straight. In 2014, Deutsche Bank took the findings of the bank's audit into the MPS trades to its local regulator, the Italian central bank, blaming the "Deal Team" - which included Schiraldi - for "insufficient and selective disclosure" on the trades. The information that was allegedly withheld – how the bank was fetching billions of dollars of bonds that underpinned the deals - allowed Deutsche to book the trades as loans rather than derivatives, the findings from the bank's audit showed. That helped reduce the amount of capital it had to hold to cover risks, making it more profitable. "An appropriate handling ... would have resulted in the transactions either being declined or escalated," Deutsche told the Bank of Italy in 2014, according to slides seen by Reuters. Schiraldi disputes that there was any such cover up of information and that the deals were widely understood. Reuters could not ascertain management's role in signing off on the deals. Deutsche Bank confirmed to Reuters that the "audit identified material failings" but declined to comment on communication with regulators. Schiraldi's lawyers claim Deutsche Bank's audit of the trades had a predetermined outcome and drew on only a fraction of the available documents. In the course of their dispute with the bank, they have successfully obtained the release of several million emails and documents, which they say, in a March 2025 court document seen by Reuters, show flaws in the way the bank handled the case. Reuters could only review a small fraction of the documents. As the bank seeks to quash Schiraldi's claims, one of its management board members has reviewed the case, sifting through emails and documents from the time, according to the person with direct knowledge of the review. Deutsche Bank, in a lengthy response to questions from Reuters, said the allegations were "false", that the audit had been thorough and independent, and that executives involved "discharged their responsibilities appropriately". Sewing had been a credit officer before the audit and approved parts of some other similar deals. "We stand by the audit's core findings," a Deutsche Bank spokesperson said. While the case is due to come before a German court later this year, such disputes may also be settled out of court. In its statement to Reuters, the bank said the claims made in the lawsuit are "based on incorrect allegations", and "an attempt to generate publicity by seeking to cause serious harm to the good reputation of executives.' ($1 = 0.8529 euros)
