DWS Investment Management Americas, a part of Deutsche Bank, is facing two separate enforcement actions by the U.S. Securities and Exchange Commission (SEC), culminating in a settlement of £25 million. These sanctions come in the wake of notable failures in Anti-Money Laundering (AML) frameworks and inaccurate disclosures related to its Environmental, Social, and Governance (ESG) investment process.
The SEC investigation found that DWS did not establish a bespoke AML programme aligned with specific risks as required by law while advising mutual funds with considerable assets. This lack of tailored AML procedures led to insufficient policies to detect signs of money laundering, posing substantial legal and reputational risks.
Gurbir S. Grewal, the Director of SEC’s Division of Enforcement, highlighted DWS’s failure to initiate a dedicated AML program for the funds, underscoring the importance of individually tailored programmes to fend off money laundering and terrorism financing.
Moreover, DWS is charged for making materially misleading assertions regarding its ESG investment process. Despite its promotion as an ESG leader, the SEC found a significant gap between DWS’s proclaimed and actual ESG integration from August 2018 to late 2021.
Sanjay Wadhwa, Deputy Director of the SEC’s Division of Enforcement, pointed out the contrast between DWS’s advertising claims and its operational reality concerning ESG investments.
Without admitting or denying the SEC’s findings, DWS has agreed to halt such practices and will pay a segmented fine, £6 million for AML deficiencies and £19 million for ESG misstatements.
This case underscores the vital importance of robust, comprehensive policies, procedures, and controls to navigate the regulatory landscape successfully. Ensuring these measures are in place and rigorously followed is crucial for safeguarding the integrity and reputation of financial institutions, highlighting the essential role of compliance in maintaining trust and ensuring the sustainable growth of financial entities.
The SEC’s inquiry was led by teams overseen by Janene M. Smith for AML and HelenAnne Listerman and Jessica Neiterman for ESG misstatements, demonstrating the SEC’s commitment to enforcing compliance across multiple facets of financial operations.
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