Regulators issued $10 bn in AML fines in 2020

Regulators issued more than $10 billion in Anti-Money Laundering (AML) fines to financial institutions in 2020, up 26 per cent on 2019, according to research from Fenergo.

The report reveals that 198 fines were issued to global financial institutions in 2020, for non-compliance with Anti-Money Laundering (AML), Know your Customer (KYC), data privacy and MiFID (Markets in Financial Instruments Directive) regulations in 2020.

The total cost of fines for breaches of the regulations totalled $10.4 billion - a year-on-year increase of 26 per cent by value and 141 per cent by volume.

The average value of enforcement actions against financial institutions for AML related compliance breaches is 44 per cent lower than in 2019.

Countries that issued the most fines by value:
- USA $ 4,348,701,664
- Malaysia $ 3,900,000,000
- Australia $ 921,587,910
- Sweden $ 550,169,770
- UK $ 199,306,927

The data shows a large increase in fines issued in the Asia-Pacific region, and include significant actions taken against Goldman Sachs and a large Australian bank, totalling $6.8 billion (from multiple regulators) – including the second biggest enforcement action imposed against one bank since 2015.

In 2019 nine fines amounting to $2.4 billion were issued by US regulators to foreign banks (UK and Italy) for sanctions violations.

This year there was just one significant sanctions fine by the Office of Financial Sanctions Implementation (OFSI) to a UK bank for breaking Russian sanctions violations. It was the largest ever fine imposed by the regulator at $25.4 million.

Global data privacy fines amounted to $88.6 million, while 203 individuals were fined $88.8 million for AML and MIFID breaches in US, Europe and China.

Rachel Woolley, Global Director of Financial Crime at Fenergo said: “2015 was a record year for enforcement actions but 2020 has the potential to match or top that year’s total if significant investigations are concluded by the end of the calendar year.

“In addition to imposing penalties on financial institutions, regulators and authorities in China, the UK and the US have held individuals accountable for compliance failings. While banks may hold reserves explicitly to settle enforcement actions, individuals will suffer a far greater personal impact. This along with greater whistleblowing protection and incentives will make a difference in tackling the industry-wide issue of financial crime.”

There was also a significant rise in the number of data privacy fines this year while the administrative sanctions handed out for MiFID violations are lower in volume and value compared to 2019.

In 2020 a total of 36 fines were issued to financial institutions and individuals at the value of $7 million, compared to 2019 when two fines alone amounted to $81.5 million.

On the data privacy side, while GDPR fines are comparable to 2019 at $1.7 million, the number of data privacy fines issued in the APAC region increased significantly with a large $529,027 fine issued in India and seven fines issued in China totalling $6,338,969.

The most significant fine levied for data privacy was to Capital One for $80,000,000 by US regulator, Office of the Comptroller of the Currency (OCC), for its 2019 cloud data breach.

Marc Murphy, chief executive of Fenergo said: “It is estimated that fewer than one per cent of criminal funds laundered through the financial system gets confiscated by authorities. The recent FinCEN files has proven that the industry must work better together to address this growing problem.

He added: “We must establish a common best practice and replace onerous manual Know Your Customer (KYC) and Anti Money Laundering (AML) risk assessment and compliance processes with technology and tools that enable financial institutions, authorities and non-financial firms to better detect and prevent financial crime.”

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