The SEC's $25 Million Fine Shakes Deutsche Bank Subsidiary DWS

<p>The
Securities and Exchange Commission (SEC) has imposed a $25 million fine on DWS
Investment Management Americas Inc. (DIMA), a Deutsche Bank AG subsidiary. The
penalty comes in two separate enforcement actions: one for failing to establish
a robust Anti-Money Laundering (AML) program and another for making false
statements about its Environmental, Social, and Governance (ESG) investment
practices.</p><p>Deutsche Bank’s Subsidiary
AML Compliance Failures and Misleading ESG Claims</p><p>The SEC's
investigation revealed that DIMA did not have an adequately designed AML
program in place, violating the Bank Secrecy Act and Financial Crimes
Enforcement Network regulations. The firm advised mutual funds with billions in
assets but failed to develop policies and procedures to detect activities
indicative of <a href="https://www.financemagnates.com/terms/m/money-laundering/">money laundering</a>. </p><p>“The SEC’s
order finds that DWS advised mutual funds with billions of dollars in assets
yet failed to ensure that the funds had an AML program tailored to their
specific risks, as required by law,” said Gurbir S. Grewal, the Director of the
SEC’s Division of Enforcement. </p><p>DIMA's
shortcomings extended to not providing AML-specific training tailored to the
mutual funds' business. The SEC emphasized that mutual funds are required by
law to have individualized programs to detect and prevent money laundering and
terrorism financing. Grewal congratulated the Asset Management Unit for taking
this significant enforcement action.</p><p>“Importantly, those AML obligations require mutual funds to establish
and implement individualized programs to detect and prevent money laundering
and terrorism financing. I congratulate the Asset Management Unit for bringing
this important mutual fund AML enforcement action.”</p><blockquote><p lang="en" dir="ltr">Today we announced Deutsche Bank Subsidiary DWS Investment Management Americas will pay $25 million to settle SEC charges related to ESG and anti-money laundering violations.<a href="https://t.co/s4HRRTo5mW">https://t.co/s4HRRTo5mW</a></p>— U.S. Securities and Exchange Commission (@SECGov) <a href="https://twitter.com/SECGov/status/1706293767961993237?ref_src=twsrc%5Etfw">September 25, 2023</a></blockquote><p>DIMA also
faced charges for making materially misleading statements about its ESG
investment process. The firm marketed itself as a leader in ESG investments,
claiming to have specific policies for integrating ESG considerations. However,
the SEC found that from August 2018 to late 2021, DIMA did not adequately
implement its global ESG integration policy. </p><p>Sanjay
Wadhwa, the Deputy Director of the SEC’s Division of Enforcement, stated that
investment advisers must ensure their actions align with their public
statements.</p><p>“Here, DWS
advertised that ESG was in its ‘DNA’, but, as the SEC’s order finds, its
investment professionals failed to follow the ESG investment processes that it marketed,”
added Wadhwa.</p><p>The SEC's
order found that DIMA violated multiple sections of the Investment Advisers
Act. Without admitting or denying the findings, DIMA agreed to a
cease-and-desist order and a $6 million penalty for the AML violations. For the
ESG misstatements, the firm agreed to a cease-and-desist order, censure, and a
$19 million penalty.</p><p>Back in
2022, Asoka Woehrmann, the Chief Executive Officer at DWS, resigned hours after
authorities <a href="https://www.financemagnates.com/executives/moves/deutsche-bank-executive-resigns-over-greenwashing-allegations/" target="_blank" rel="follow">raided the DWS' offices</a>. According to the Associated Press,
there were allegations about the group engaging in ‘greenwashing’ by
exaggerating the sustainable credentials of certain funds it had sold.</p><p>“The
allegations are that DWS has been advertising so-called ESG financial products
for sale as being particularly green and sustainable when they actually
weren’t. In the course of our investigations we’ve found evidence that could
support allegations of prospectus fraud,” a spokesman for the public prosecutor
said a year ago.</p><p>Other Fines Issued by SEC</p><p>Last week, <a href="https://www.financemagnates.com/" target="_blank" rel="follow">Finance
Magnates</a> informed that <a href="https://www.financemagnates.com/cryptocurrency/citadel-securities-slapped-with-7m-fine-for-coding-error-sec-says/" target="_blank" rel="follow">Citadel Securities settled</a> allegations of breaching
Regulation SHO, a rule designed to regulate short-selling activities. The
<a href="https://www.financemagnates.com/terms/s/settlement/">settlement</a> focused on the firm's supposed inability to correctly label sale
orders as either long, short, or short exempt.</p><p>Earlier
this month, the SEC took <a href="https://www.financemagnates.com/forex/news-nuggets-13-september-sec-charges-virtu-yieldstreet-hk-warns-against-crypto-firm/" target="_blank" rel="follow">action against YieldStreet Inc</a>. and its subsidiary,
YieldStreet Management LLC, for not disclosing essential details to investors
in a $14.5 million asset-backed securities offering. The regulatory body
determined that YieldStreet failed to inform investors about the increased risk
of not being able to claim collateral if a loan were to default, putting
investors at considerable financial risk.</p><p>In a
separate case from August, <a href="https://www.financemagnates.com/forex/news-nuggets-30-august-sec-charges-citigroup-fma-and-fca-warn-against-clone-websites/" target="_blank" rel="follow">Citigroup Global Markets Inc. (CGMI)</a> faced charges
from the SEC for deliberately failing to meet federal recordkeeping standards.
The SEC discovered that from 2009 to 2019, CGMI employed an unverified approach
to tally and document indirect expenses related to its underwriting operations.
The regulatory agency stressed the necessity of precise recordkeeping for
maintaining well-regulated markets and pledged to persist in upholding federal
securities laws.</p>

This article was written by Damian Chmiel at www.financemagnates.com.