The financial scale of fines and other penalties imposed on institutions for failings on AML controls and other areas rose by almost a third in the first six months of 2024 from a year earlier, suggesting the industry has work to do in tightening up controls.

There was a 31 per cent rise in the number of fines imposed on financial institutions for various transgressions in the first six months of 2024 from the same period in 2023, according to new figures from Fenergo. 

Asia-Pacific firms saw the largest rise in penalties, Dublin-headquartered Fenergo, which is a provider of digital solutions for know your customer, transaction monitoring and client lifecycle management, said in a report. 

Global financial regulators levied 80 fines in the first half of 2024, totaling $263.252 million for not complying with AML, KYC regulations, sanctions and transaction monitoring procedures. In the same period last year, regulators issued over $201 million.

The highest value fine in 2024 thus far, at $65 million, was issued to the US subsidiary of a Canadian bank following unsafe practices related to operational, compliance, and strategic risk management controls. The bank was ordered to pay the fine to resolve investigations by The Office of the Comptroller of the Currency (OCC), an independent bureau of the US Department of the Treasury.

The most significant increase in enforcement action values relate to AML which increased by 87 per cent to $113.2 million while penalties specifically for transaction monitoring and suspicious activity report breaches, increased to $30.5 million over the last six months, up from $6 million. 

Fines for breaches to regulations related to politically exposed persons (PEPs) came in at $26 million and KYC fines increased by 102 per cent reaching a record high of $51 million in H1 2024. 

In terms of sectors, banks were on the receiving end of the most stringent enforcement actions at $136 million followed by digital asset providers ($49.3 million), payments firms ($40 million) and private banks ($32.1 million).

“With watchdogs increasingly deploying highly sophisticated technology to more effectively identify wrongdoing, the surge in enforcement actions in H1 seems unlikely to abate in H2,” Rory Doyle, head of financial crime policy at Fenergo, said. “Financial institutions must take this extremely seriously. These penalties disrupt investor confidence, negatively impact share price, and damage companies’ reputations –consequences many firms, regardless of their size, cannot afford to shoulder.”