Deutsche Bank’s (NYSE:DB) subsidiary, DWS Investment Management Americas (DIMA), has agreed to pay a penalty of $25 million to settle two allegations by the Securities and Exchange Commission (SEC). The regulator claims DB lacked a proper mutual fund anti-money laundering (AML) program and misstated its environmental and social investing (ESG) process.
Allegations in Detail
Regarding the ESG case, the SEC stated that DIMA made materially misleading statements while incorporating ESG factors into investment recommendations.
Furthermore, the regulator noted that DIMA marketed itself as an ESG leader. However, from August 2018 to late 2021, the investment unit did not effectively implement specific aspects of its global ESG integration policy, as it had indicated to clients and investors.
In the AML case, the SEC discovered that DIMA failed to implement a proper AML program for the mutual funds it advised. Moreover, these funds did not establish procedures aimed at identifying signs of money laundering, nor did they provide AML training tailored to the mutual funds’ operations.
It is worth mentioning that DWS Investment Management did not admit or deny the charges. However, the company stated that it has implemented measures to address the flaws in its procedures that were identified in the SEC ESG order.
Money laundering issues are not new at Deutsche Bank. The bank’s New York unit was fined about $186 million by the Federal Reserve in mid-July. The regulator cited that the bank had not made adequate progress in addressing issues outlined in the 2015 and 2017 consent orders regarding money laundering and sanctions violations.
Also, in November 2022, German financial watchdog BaFin asked DB to take measures to enhance its money laundering prevention efforts.
Is DB a Buy?
Deutsche Bank has a Moderate Buy consensus rating based on eight Buys, five Holds, and three Sells assigned in the past three months. Meanwhile, DB stock’s average price target is $15.20, implying a 42.2% upside potential. So far in 2023, the stock is down about 6%.