Deutsche Bank Subsidiary To Pay $25 Million For ESG Misstatements, AML Violations

Today in “the ESG narrative continues to crumble to the ground” news, it was announced that the Securities and Exchange Commission charged a subsidiary of Deutsche Bank, in two enforcement actions.

The subsidiary, investment adviser DWS Investment Management Americas Inc., was charged once for a “failure to develop a mutual fund Anti-Money Laundering (AML) program”, an SEC press release read, and again for “misstatements regarding its Environmental, Social, and Governance investment process”. 

Color us not surprised, as we have been vociferous in pointing out how trillions in investor capital shifted course over the last few years under the guise of seeking out “ESG” investments. As we’ve noted on this site, the claim has often clearly been a grift, with asset managers using it as an excuse to ascertain new capital, while pouring the money into the same investments most “regular” index funds have exposure to. 

The SEC says it found that “DIMA 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”. 

The subsidiary “marketed itself as a leader in ESG that adhered to specific policies for integrating ESG considerations into its investments; however, from August 2018 until late 2021, DIMA failed to adequately implement certain provisions of its global ESG integration policy as it had led clients and investors to believe it would,” the release continues. 

Sanjay Wadhwa, Deputy Director of the SEC’s Division of Enforcement and head of its Climate and ESG Task Force weighed in: “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,” Wadhwa continued. 

On the AML side, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, commented: “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 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,” Grewal continued.

The Deutsche subsidiary will pay $25 million in combined fines.