Justice department says lending giant may have violated criminal settlement struck in January
While there’s no definitive metric yet to determine ESG-friendliness of investment products, a case in the U.S. shows that the shift toward regulating financial firms based on their ESG-related claims is slowly but surely happening.
The U.S. Department of Justice has told Deutsche Bank that it may have violated a criminal settlement by failing to tell prosecutors about an internal complaint relating to its sustainable investing business, reported the Wall Street Journal.
Citing unnamed sources, the Journal said U.S. authorities learned about the complaint from an article the publication printed in August. It said the bank’s asset-management unit, DWS Group, had been internally accused of overstating the degree to which it used ESG criteria to manage its assets.
According to the people familiar with the matter, the bank had ongoing disclosure and compliance obligations to the DOJ under a criminal settlement struck in January. That settlement was related to Deutsche Bank’s role in overseas corruption and market manipulation.
To avoid being indicted, the firm entered into a deferred-prosecution agreement with the U.S. government, which required that it stay out of trouble over a period of several years. During that time, the bank is also required to flag and report any potential problems as soon as it learns of them.
Should U.S authorities decide to hold Deutsche Bank accountable for a breach of its agreement, the deal may be nullified and, in the worst case, the bank could face indictment and prosecution.
American authorities could alternatively tell it to pay an additional fine and make other changes, such as hiring an external monitor to probe the bank’s business and conduct a review of its compliance efforts.
As per the January settlement, prosecutors must give notice before launching a prosecution, the Journal said. The bank is also permitted to provide its own feedback on how it handled the alleged violation.
The U.S. authorities have yet to make a final decision, according to the people familiar with the matter.
