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Deutsche Bank subsidiary settles SEC charges for $25 million over ESG misstatements and AML failures

EditorPollock Mondal
Published 25/09/2023, 15:00
© Reuters.
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Deutsche Bank AG (NYSE:DB)'s asset management subsidiary, DWS Investment Management Americas Inc. (DIMA or DWS), has agreed to pay a total of $25 million in penalties to resolve two separate enforcement actions brought by the U.S. Securities and Exchange Commission (SEC). The charges relate to the firm's failure to develop a mutual fund Anti-Money Laundering (AML) program and misleading statements regarding its Environmental, Social, and Governance (ESG) investment process.

The SEC's order found that DIMA failed to ensure that the mutual funds it advised had an AML program tailored to their specific risks, as required by law. This resulted in the mutual funds' failure to adopt and implement policies and procedures designed to detect activities indicative of money laundering. To settle these charges, DIMA agreed to a cease-and-desist order and a $6 million penalty.

In the second enforcement action, the SEC found that DIMA made materially misleading statements about its controls for incorporating ESG factors into research and investment recommendations for ESG-integrated products. Despite marketing itself as a leader in ESG that adhered to specific policies for integrating ESG considerations into its investments, from August 2018 until late 2021, DIMA failed to adequately implement certain provisions of its global ESG integration policy. As a result, DIMA agreed to a cease-and-desist order, censure, and a $19 million penalty.

DIMA has been under scrutiny by various agencies including the SEC since a former employee went public with claims that the asset manager had inflated its ESG credentials. This scrutiny led to investigations that impacted the firm’s share price as investors sought to assess the financial impact.

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The firm rejected these claims from the outset and has said it stands behind the disclosures targeted in the probes. In addition, DWS noted that it cooperated in the investigation and initiated remediation efforts, which the SEC recognized.

The $25 million fine is the highest ever handed out by the SEC over allegations of greenwashing. Previous fines include a $1.5 million penalty for Bank of New York Mellon (NYSE:BK) Corp.’s asset manager in May 2022 and a $4 million fine for Goldman Sachs Group Inc (NYSE:GS).’s investment arm in November 2022.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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