Regulators Continue AML Breach Punishments; Fines Fell In 2021

Editorial Staff, January 10, 2022


The culmination of big fines for dirty money flows and AML lapses in 2020 meant that figures for 2021 looked far lower in comparison, but problems with compliance violations remain, new data shows.

National regulators around the world continue to slap fines on businesses for anti-money laundering lapses and other failings. However, on the face of it, the scale and number of punishments slumped in 2021 from a year before, figures from financial technology firm Fenergo show.

2020 wasn’t just a period that will live in memory as the year of the pandemic, it was the year when Malaysia’s state-created fund, 1MDB, led to a raft of probes over bribery and money laundering, with subsequent punishments topping $10.6 billion globally. In 2021, by contrast, the total was $5.4 billion. That is still a large sum though. 

The fallout from the 1MDB scandal continued to influence enforcement activity in Malaysia in 2021 with AmBank Group agreeing to pay a $698.3 million settlement to the Ministry of Finance for its role in the violations. The 1MDB affair had a wide footprint, snagging banks such as Goldman Sachs. Financial centers including the US, Switzerland and Singapore were affected. 

Notable enforcement actions in 2021 included a $2.03 billion penalty issued to UBS by the French Court for historic tax fraud (it should be noted that UBS is appealing this case, as reported here at sister news service WealthBriefing). In the US, regulators issued $673.2 million in enforcement actions to foreign banks, including a $100 million fine to the UAE’s private bank, Mashreqbank PSC, for illegally processing more than $4 billion of payments linked to Sudan, Fenergo said.

“The decrease in fines in 2021 is largely attributed to a reduction in the number of multi-billion-dollar fines compared to previous years. The pandemic has also impacted regulatory investigations; regulators weren’t able to initiate as many on-premise investigations in the last two years which has likely had a knock-on effect on enforcement actions,” Rachel Woolley, global director of financial crime at Fenergo, said.

“Trends identified in our research, as well as recent financial crime scandals, suggest that financial institutions aren’t adequately equipped to manage the financial crime risks to which they are exposed. Without effective AML/KYC systems and controls that allow firms to not only know their customer and the associated risks, but also understand their behavior throughout their lifecycle – the door will be left open for criminals.”

The total volume of fines levied on firms for compliance breaches shrank to 176 from 760 in the same period the year before. The average fine value for AML-related compliance breaches issued to financial institutions in 2021 was $34.4 million, Fenergo said. Europe, the Middle East and Africa saw the single biggest regional increase in the value of financial penalties from just over $1 billion in 2020 to $3.4 billion in 2021.

The global research comes just weeks after two major UK-based banks were fined $85 million and $350.3 million for AML failures (HSBC and NatWest, respectively).

2021 also saw the rise of non-banking financial firms being targeted by regulators, such as virtual asset service providers. Crypto-trading platform, BitMEX and crypto payments provider Bitpay, were fined a combined amount of $100,507,375 for failing to comply with money laundering obligations.

The Fenergo report also noted that financial institution employees continued to face regulatory scrutiny in 2021 with 16 individuals being fined $16.5 million for their role in AML-related compliance breaches. In Bahrain, the High Criminal Court went as far as sentencing six Future Bank employees to prison with a fine of $2.7 million each for their role in Bahrain’s largest money laundering case in the history of the state.

Data privacy fine values fell 82 per cent at $17.4 million, the majority ($11.5 million) of which were for GDPR breaches in Europe. (The US does not yet have an equivalent privacy law at the federal level.)

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