Fines for anti-money laundering failures rise as firms repeat errors


Regulators imposed greater fines for anti-money laundering failures within the first half of this yr than they did in the entire of 2019, in accordance with new information, as firms repeated their earlier errors in making an attempt to fight monetary crime.

In its newest overview of worldwide authorities’ enforcement actions, consultancy Duff & Phelps discovered that AML fines within the preliminary six moths of 2020 reached a complete of $706m, in contrast with final yr’s mixture of $444m.

However these current penalties had been imposed for precisely the identical procedural shortcomings that regulators have been highlighting since 2015: in due diligence on new clients, administration of AML measures, monitoring of suspicious exercise and making certain compliance with the principles.

Nick Bayley, head of UK regulatory consulting at Duff & Phelps, stated: “We see the identical areas being sanctioned repeatedly . . . Regardless of the repeated messages in these enforcement instances it’s clear that market individuals are persevering with to battle with their obligations.”

Buyer due diligence was essentially the most continuously punished failing, with 115 important instances reported thus far this yr.

Whereas the overview didn’t select any particular examples, one of many highest-profile enforcement actions in current months concerned the London department of German lender Commerzbank. It was fined £38m in June by the UK’s Monetary Conduct Authority for failing to make ample AML checks over a five-year interval. This was the second-largest nice ever imposed by the British regulator for deficiencies in stopping probably unlawful transactions.

Authorized consultants advised that monetary teams’ persistent failings mirrored a scarcity of resourcing and system upgrades.

“This could be in line with our expertise in observe,” stated Anna Bradshaw, a accomplice at regulation agency Peters & Peters. “The basis trigger is all the time a scarcity of sources. AML sources are both not ample, or they aren’t allotted effectively.”

Alison Wilson, a accomplice at regulation agency Linklaters, stated a lot enforcement exercise associated to legacy techniques and controls. “Banks are overhauling [them],” she stated, “however the variety of fines on this space exhibits the inherent problem in getting this proper.”

Nevertheless, the Duff & Phelps overview discovered that this yr’s AML fines had been nonetheless decrease than the full in 2018, which could replicate a shift in regulatory strategy — and compliance — in a single main jurisdiction.

“Regardless of the uptick in AML nice quantities in 2020 we’re nonetheless seeing fewer large fines being imposed in the USA,” stated Mr Bayley. “It might merely be that the very largest monetary establishments could also be starting to get their AML compliance so as, eventually.” 

In 2018, US authorities handed down 58 per cent of all AML fines imposed around the globe. In contrast, this yr, they account for less than 12 per cent of the worldwide whole.

However with AML case numbers not considerably lowered, Duff & Phelps concluded that US regulators should have merely scaled again the “mega-fines” they imposed in earlier years, slightly than altering their focus.

An extra issue on this shift can have been elevated enforcement exercise elsewhere, stated Ms Bradshaw — specifically, the EU. “The rise in non-US fines can even replicate new powers, such because the French deferred prosecution agreements first deployed for AML failings by HSBC Personal Financial institution in 2017 and extra just lately for AML failings by the Financial institution of China Restricted,” she stated.

Heightened European enforcement exercise may additionally have been motivated by a want to “fend off extra damaging US consideration”, she added.


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