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DWS logo: Sustained trouble with the supervisors

Photo: Ralph Orlowski / REUTERS

With the payment of 25 million dollars in the USA, the fund company DWS, which belongs to Deutsche Bank, is settling allegations of money laundering and misrepresentation regarding sustainable investments. The company failed to establish a legally mandated anti-money laundering program and also made "worrying" misstatements about its ESG investments, the U.S. Securities and Exchange Commission (SEC) said. ESG stands for the aspects of environmental protection, social responsibility and good corporate governance in business.

DWS is relieved by the SEC's order: "We are glad that we were able to complete these investigations," the company said. The Deutsche Bank subsidiary emphasizes that the SEC did not find any false information in financial disclosures or fund prospectuses. In addition, the order makes it clear "that there was no fraudulent intent and that the vulnerabilities identified relate to processes and procedures that the company has already taken to improve."

Allegations of greenwashing at DWS first surfaced in 2021. The former head of the company's sustainability division, Desiree Fixler, had accused the company of being too lax with the criteria for ESG investments. The manager, who left DWS after only a few months on the job, had initially revealed herself as a whistleblower to the U.S. Securities and Exchange Commission (SEC) and the FBI in 2021.

Authorities in Germany and the U.S. investigated allegations that the Deutsche Bank subsidiary had presented green funds more sustainably than they actually were. DWS had always denied the allegations, but at the same time provided for financial sanctions. So the company can probably cope with the penalty: The payment of 25 million dollars corresponds approximately to the provisions formed, writes Mandeep Jagpal, analyst at the Canadian bank RBC.

Because of greenwashing, consumer advocates in Germany had also taken action against the fund company. The Baden-Württemberg Consumer Advice Centre had sued the company in September 2022 on suspicion of greenwashing. The consumer advocates filed a lawsuit with the Frankfurt Regional Court for "misleading advertising for allegedly sustainable investments". DWS had rejected the criticism of the consumer advice center at the time. The company takes great care in the creation of promotional materials.