The Clearing House - Corporate Changes in Payment Practices - September 2023

SEC: DWS Failed to Develop Anti-Money Laundering Program


DWS Investment Management Americas is facing two separate enforcement actions from the Securities and Exchange Commission (SEC).

The SEC said in a news release Monday (Sept. 25) that DWS, a registered investment advisor and Deutsche Bank subsidiary, failed to set up a mutual fund anti-money laundering (AML) program.

In the other action, the SEC charged that the company made misstatements connected to its environmental, social and governance (ESG) investment process. To settle the charges, DWS agreed to pay $25 million in penalties, the SEC said.

“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, director of the SEC’s Division of Enforcement.  

In the other action, the SEC found that DWS billed itself as a leader in ESG, but from August 2018 until late 2021, “failed to adequately implement certain provisions of its global ESG integration policy as it had led clients and investors to believe it would.” 

In a statement issued Monday, DWS said it was “pleased” to have resolved the matter, noting that the SEC’s ESG order had found “no misstatements in relation to our financial disclosures or in the prospectuses of our funds.”

“With respect to the settlement resolving the SEC’s examination into our historic AML policies and procedures, we are committed to maintaining a robust risk management framework, and since 2020, have taken steps to enhance our AML processes for our U.S. mutual fund business,” the company said. 

“We are glad that the SEC has also acknowledged our cooperation in connection with the investigation in this case, and our remediation efforts in respect of the findings,” the company added.  

The action comes as corporate ESG policies are under fire from Republican lawmakers. For example, House Financial Services Committee (HFSC) Chairman Patrick McHenry said in July he hopes to reduce the influence of ESG initiatives in financial markets.

“ESG mandates politicize capital allocation, with the intent to force certain actions from American public companies,” McHenry said. “This leads to reduced returns for everyday investors and weaker economic growth by diverting executives’ attention away from sound financial management.” 

Meanwhile, TD Bank revealed last month that it was cooperating with an SEC probe examining its compliance with anti-money laundering rules.

The bank made this disclosure in its third-quarter report to shareholders that it may face penalties as a result of the ongoing probe. TD Bank also said that it is actively working to enhance its Bank Secrecy Act/anti-money laundering compliance program.