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DWS to Pay US$25 Million to SEC for AML, ESG Failings

The US Securities and Exchange Commission (SEC) has settled charges against Deutsche Bank-controlled investment firm DWS in two separate enforcement actions. One action involves “concerning” misstatements DWS made regarding its ESG investment process, with the SEC stating that DWS made materially misleading statements about its controls for incorporating ESG factors into research and investment recommendations for ESG integrated products, including certain actively managed mutual funds and separately managed accounts. According to the SEC’s order, DWS marketed itself as a leader in ESG investing, but from August 2018 until late 2021, it “failed to adequately implement certain provisions of its global ESG integration policy as it had led clients and investors to believe it would”. The SEC also said DWS failed to adopt and implement policies and procedures reasonably designed to ensure that its public statements about the ESG integrated products were accurate. DWS has also failed to address failures by DWS to develop a mutual fund AML programme. The SEC said DWS caused mutual funds it advised to fail to develop and implement a “reasonably designed” AML programme to comply with the Bank Secrecy Act and applicable FinCEN regulations and implement policies and procedures reasonably designed to detect activities indicative of money laundering. Without admitting or denying the SEC’s findings, DWS agreed to a cease-and-desist order and a US$ 6 million penalty in the AML action, and to a cease-and-desist order, censure, and a US$19 million penalty in the ESG misstatements action. In a statement, DWS said it is pleased to have resolved the matters that relate to certain “historic processes, procedures and marketing practices”, adding that it stands by the ESG statements made in its financial disclosures and fund prospectuses and has already taken steps to address weaknesses. 

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