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In the latest enforcement action, the Security Exchange Commission (SEC) has fined $25 million to the Deutsche Bank subsidiary DWS Investment Management America for violating Anti-Money Laundering (AML) regulations and failure to report suspicious activities.
The SEC penalised DWS for failing to comply with AML regulations, reporting suspicious transactions, and providing misleading information about its Environmental, Social, and Governance (ESG) investment strategy. DWS agreed to pay $25m in penalties for violating laws. In the investigations, the SEC’s action committee identified that DWS did not implement adequate measures of AML designed to comply with the Bank Secrecy Act (BSA) and Financial Crimes Enforcement Network (FinCEN) regulations.
Director of the SEC’s Division of Enforcement, Gurbir S. Grewal, who cracked down on DWS’s compliance failures, addressed in the statement that upholding AML regulations is one of the most fundamental duties for DWS in mutual funding. They must ensure that the multi-billion dollar mutual funds are advised by specific profiles, and operational risk should be considered. The director stated, “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. Importantly, those AML obligations require mutual funds to establish and implement individualised programme to detect and prevent money laundering and terrorism financing. I congratulate the Asset Management Unit for bringing this important mutual fund AML enforcement action.”
The SEC’s second enforcement action alleged that DWS falsely characterised its financial controls for the use of ESG elements in investing advice and research for ESG-integrated products, namely some actively managed mutual funds and individually controlled accounts.
The action plan revealed that DWS advertises the most adhered ESG banking investment opportunity. However, from August 2019 to 2021, they did not comply with global ESG policies. Deputy Director of the SEC’s Division of Enforcement and head of its Climate and ESG Task Force, Sanjay Wadhwa, stated, “whether advertising how they incorporate ESG factors into investment recommendations or making any other representation that is material to investors, investment advisers must ensure that their actions conform to their words. 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.”
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