Deutsche Bank unit fined $25M in ESG, AML settlements

DWS Investment Management Americas was fined $19 million as part of the ESG action and $6 million for the AML lapses, the SEC announced in a press release Monday.

Deutsche Bank has been no stranger to punishment over its AML controls, while the ESG matter received notable attention last year after then-DWS Chief Executive Asoka Woehrmann announced his resignation amid an investigation by German officials into allegations of greenwashing.

The details: In the ESG case, the SEC found DWS marketed itself to clients and investors as a leader in ESG—using terms like “top of mind” to describe its attitude toward the subject—despite not properly adopting and implementing policies and procedures to ensure such public representations were not misleading. The alleged issues, occurring from August 2018 until late 2021, were exacerbated by communication lapses; the SEC noted some DWS senior portfolio managers were not aware of the firm’s ESG integration policy.

“Due to a lack of controls to monitor, ensure, and document compliance with these policies, [DWS] senior management could not actually know if investment professionals were consistently following, or attempting to consistently follow, the requirements that they consider material ESG risk factors in each investment decision,” the SEC said in its order.

In the AML matter, DWS was faulted for failing to develop and implement a reasonably designed AML program to comply with the Bank Secrecy Act. From January 2017 until December 2021, DWS did not have an AML compliance program specifically for mutual funds, the SEC alleged, instead adopting an incompatible AML program designed for the U.S. operations of Deutsche Bank.

Among issues raised by the SEC were supervision failures regarding transactions generated by DWS’s vendor-provided software system for transaction monitoring. AML training specific to the firm’s mutual funds business was also not conducted, the agency found.

Compliance considerations: Regarding the ESG case, DWS was acknowledged for its cooperation by providing detailed factual summaries to the SEC and for modifying its relevant processes, policies, procedures, and controls.

For AML, the firm in December 2021 adopted a standalone AML compliance program specific for its mutual funds business. DWS in April 2022 ceased using its problematic transaction monitoring system, and it overhauled its AML training program for relevant employees by late 2022.

Firm response: “We are pleased to have resolved these matters that relate to certain historic processes, procedures, and marketing practices the firm has since addressed,” said DWS in a statement. The firm noted the ESG matter did not allege misstatements in relation to financial disclosures.

DWS neither admitted nor denied the SEC’s findings in either of its orders.