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Leaked FinCEN files show Deutsche Bank tops list of suspicious transactions

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A pedestrian with a umbrella walks pass a logo of Deutsche Bank in Frankfurt am Main, Germany.

Thomas Lohnes | Getty Images

SINGAPORE — Germany’s largest lender Deutsche Bank appears to have facilitated more than half of the leaked $2 trillion of suspicious transactions that were flagged to the U.S. government over nearly two decades, reported German broadcaster Deutsche Welle (DW).

Those documents showed that between 1999 and 2017, $1.3 trillion of $2 trillion in leaked transactions that were flagged as suspicious passed through Deutsche Bank, according to the DW report.

The leaked documents contained suspicious activity reports that banks and other financial institutions filed with the U.S. Department of Treasury’s Financial Crimes Enforcement Network, or FinCEN. Financial firms are required by law to alert regulators when they detect activities that may be suspicious, such as money laundering or sanctions violations. Such reports are not necessarily evidence of any criminal conduct.

In a statement posted on its website, the German bank said the incidents in the leaked documents “have already been investigated and led to regulatory resolutions in which the bank’s cooperation and remediation was publicly recognized. Where necessary and appropriate, consequence management was applied.”

It also said that it has “devoted significant resources to strengthening our controls” and “are very focused on meeting our responsibilities and obligations.”

Deutsche Bank has previously been found to facilitate financial transactions that violate U.S. sanctions. In 2015, Deutsche Bank agreed to pay fines worth $258 million for doing business with U.S.-sanctioned countries including Iran, Syria, Libya, Sudan and Myanmar, according to DW.  But the leaked FinCEN documents suggested that the bank had continued to move suspicious funds after that 2015 settlement, the report said.

Read more about Deutsche Bank’s suspicious transactions in the report by Deutsche Welle.

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Active funds are not being muscled out by ETFs, Refinitiv expert says

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ETFs are traded on exchanges, so they can be bought and sold like stocks through a brokerage.

Tetra Images | Getty Images

Although exchange-traded funds are growing in popularity, they are not yet making meaningful incursions into the territory of actively-managed funds, according to Refinitive’s Head of Lipper EMEA Research, Detlef Glow.

Money market funds — which usually invest in low-risk, liquid assets like short-term bonds — were the best-sellers over the year to date, with inflows of 211.3 billion euros ($248.4 billion), according to Refinitiv’s European Fund Industry Review. Meanwhile, funds focused on global equities were the most popular among long-term investors, with the sector seeing inflows of 62.8 billion euros.

ETFs have enjoyed inflows of 48.5 billion euros so far in 2020, and Glow highlighted that their popularity has been growing across all types of investors. ETFs are collections of securities that track an underlying index, while mutual funds are actively managed and buy or sell assets strategically in a bid to beat the market and deliver profit to investors.

However, Glow told CNBC’s “Squawk Box Europe” on Monday that despite popular belief, ETFs were not materially affecting demand for active investment funds.

“If you look at the general assets under management number, we have got 11.1 trillion (euros) invested in mutual funds, this is 92.7% of the market, and we have got only 0.87 trillion invested in ETFs, which is 7.3% of the market,” Glow said.

He noted that in terms of flows, things looked a bit better for ETFs, with 45.8 billion euros of total inflows, or 15%, going into ETFs and the remaining 85% going into mutual funds.

“This 15% is roughly the average we saw over the last few years, so from my point of view, there is no reason to be majorly concerned about ETFs when it comes to net sales,” Glow said.

Total assets under management slipped

The report noted that the fund industry had been hit hard at the beginning of the pandemic, posting net outflows of 125.9 billion euros in the first quarter of 2020.

The strong fiscal and monetary policy response from governments and central banks around the world, and subsequent normalization of markets, led investors back into ETFs and mutual funds in the second and third quarters and brought total net inflows to 297.1 billion euros by the end of September.

“We see that European investors put their money on the sideline by buying into money-market Europe, money-market U.S. dollars, as well as money-market pound sterling,” Glow told CNBC on Monday.

“But we also see that they are buying into diversified products, i.e. Equity Global as well as in specific themes like information technology and healthcare.”

However, Refinitiv found that total assets under management across the region’s fund industry slipped from 12.3 trillion euros in Dec. 2019 to 12 trillion euros in Sept. 2020, which it attributed in large part to the performance of underlying markets, which saw a 531 billion euro decline.

The report identified BlackRock as the best-selling fund promotor over the period, with net sales of 68.3 billion euros, followed by JPMorgan at 56.9 billion euros and Goldman Sachs at 23.3 billion euros.

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Why tech IPOs are flourishing in the U.S. and China — but not Europe

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China says its economy grew 4.9% in the third quarter

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A pump attendant wears a mask as he refuels a car at a Sinopec gas station where customers can buy supplies as the country is hit by an outbreak of the novel coronavirus, in Beijing, China, February 28, 2020.

Thomas Peter | Reuters

BEIJING — China’s economy recovered further from the coronavirus in the third quarter, according to data released Monday by the National Bureau of Statistics.

The world’s second-largest economy reported third-quarter GDP growth on the low end of expectations, up 4.9% from a year ago. That brings growth for the first three quarters of the year to 0.7% from a year ago.

Chinese economists expected GDP growth of 5.2% in the third quarter, according to an average of estimates compiled by Wind Information, a financial information database.

Slower recovery in Chinese consumption remained a drag, while uncertainty persisted about the ability of other countries to control the coronavirus pandemic and return to economic growth.

“Generally speaking, the overall national economy continued the steady recovery and significant results have been delivered in coordinating epidemic prevention and development,” the bureau said in an English-language release.

“However, we should also be aware that the international environment is still complicated and severe,” the release said, “with considerable instabilities and uncertainties, and that we are under great pressure of forestalling epidemic transmissions from abroad and its resurgence at home. The economy is still in the process of recovery and the foundation for sustained recovery needs to be consolidated.”

The recovery ahead will largely depend on the consumption recovery.

Larry Hu

chief China economist, Macquarie

Retail sales still in contraction for 2020

Retail sales rose 3.3% in September, for a 0.9% increase in the third quarter. For the first nine months of the year, retail sales contracted 7.2%.

During those three quarters, online sales of goods rose 15.3% from a year ago, accounting for 24.3% of retail sales.

“China’s return to economic dynamism with a faster-than-peers pace is the first step towards a global recovery,” Bruce Pang, head of macro and strategy research at China Renaissance, said in a note.

While he expects further growth from China, Pang noted that issues such as unemployment, diminished household income and shifting consumer behavior could affect Beijing’s efforts to increase the contribution of consumption to growth. Instead, authorities might be more inclined to rely on investment and exports for growth, which face their own challenges from uncertainty about the global recovery and geopolitical tensions.

Pang pointed out that the services, or tertiary, sector of the economy recovered more slowly than the primary and secondary sectors, which respectively refer broadly to agriculture and manufacturing.

Out of the three categories, the services sector has grown the fastest for the last few years, but has lagged so far in 2020, up 0.4% in the first three quarters of the year versus 2.3% in the primary sector and 0.9% for the secondary.

Fixed asset investment rose 0.8% in the first three quarters of the year, the statistics bureau said Monday.

Industrial production rose 6.9% in September from a year ago, bringing total growth for the first nine months of the year to 1.2%.

Unemployment challenges

The official urban surveyed unemployment rate edged lower in September to 5.4%. As with much government data, the accuracy of the figure is highly doubted. The rate remains below a record 6.2% hit in February during the height of the coronavirus pandemic in China.

For the key group of recent university graduates, bureau spokeswoman Liu Aihua told reporters Monday at a press briefing that the pressure on employment is still “relatively high.”

She said an unspecified unemployment rate for 20- to 24-year-olds holding at least a college degree — primarily new graduates — was 4 percentage points higher in September than a year ago, despite falling slightly from August.

In addition, about 3.8 million fewer migrant workers from rural parts of China had returned to their jobs in cities by the end of September, versus the same period last year, a decline of 2.1%.

“With policy normalization, the recovery ahead will largely depend on the consumption recovery,” Larry Hu, chief China economist at Macquarie, said in a note.

He expects domestic demand will accelerate its growth in coming months, given strong results from the Golden Week holiday in early October. Hu predicts 5.5% GDP growth in the fourth quarter, 15% in the first quarter of next year, for annual growth of 2% in 2020 and 8.5% in 2021.

Official figures showed China’s gross domestic product contracted 6.8% in the first three months of the year, when more than half the country shut down temporarily in an effort to limit the spread of the coronavirus. GDP grew 3.2% in the second quarter.

The International Monetary Fund expects China will be the only major world economy to grow this year, at 1.9%.

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