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- 1 Deutsche Bank’s asset management unit, DWS, has violated ESG and AML compliance policies./a>
- 2 The SEC fined the company for its irregularities and highlighted flaws at the top rung.
- 3 The company issues a formal statement, saying that they have fixed all the problems.
Deutsche Bank’s name has been associated with AML discrepancies in the past. The regulators have fined it on several occasions. This time, however, its asset management unit is in a fix for similar reasons. The SEC has slapped a fine of $24 Million on DWS Investment Management Americas. The total amount comprises $19 million for ESG and $6 Million for AML lapses.
Full Details Into ESG and AML Charges
The Securities and Exchange Commission found irregularities in multiple areas this time. The regulator found that DWS was marketing itself as a leader in environmental, social and governance (ESG). It tried to influence clients and investors while claiming its solutions were ‘top of mind.’ And it was misleading, as the company didn’t adopt or implement procedures to address this cause.
The SEC highlighted that some DWS senior portfolio managers weren’t even aware of its ESG norms. Because of the lack of monitoring and compliance, the firm’s top brass were unaware of its marketing professionals’ claims. It eventually resulted in baseless propaganda that violated many rules of ESG compliance.
In the case of AML, DWS failed to comply with the Bank Secrecy Act. The firm couldn’t develop and implement a program that followed the rules of the state. Furthermore, the SEC alleged that it didn’t have any AML compliance program for mutual funds from 2017 to 2021. Instead, it resorted to an incompatible program created for the US operations of Deutsche Bank.
Other issues raised by the SEC included supervision failures. The regulator alleged that the vendor-provided software system for transactions wasn’t properly monitored. In addition, DWS didn’t conduct AML-specific training for its mutual fund staff. In the ESG case, DWS cooperated with the SEC by providing detailed factual summaries. It also made necessary changes to its relevant policies, procedures and processes.
As far as AML is concerned, the firm implemented a mutual fund-centric AML compliance program. DWS claims that it has not used its faulty transaction monitoring system since 2022. Moreover, it revised its AML training program for the relevant employees around the same time. Deutsche proactively stated this matter. As per the statement, they were pleased to resolve the matter once and for all.
The company stressed rectifying the old procedures and practices. Notably, DWS neither accepted nor rejected the SEC’s charges in either of its orders.
What To Make Of This Incident?
Regulatory violations aren’t new in the corporate world. If anything, the instances could even increase as the industries are on the cusp of full-fledged transformation. Technologies like AI and blockchain are changing the way companies operate inherently. Amidst all the talk of revolution and innovation, regulation is often an overlooked gray area. In the next few years, many countries will have regulatory frameworks for cryptocurrency and AI.
However, it would be too unrealistic to think that it would be smooth sailing. With close coordination between companies and regulators, these issues can be fixed seamlessly. And that’s what the world is hoping for in the future.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
