AML Fines Rose in First Half of 2020, Driven By Familiar Errors
12 Aug 2020

Financial supervisors levied larger fines for anti-money laundering (AML) violations in the first half of the year than they did for all of 2019, as institutions repeated past compliance mistakes, the Financial Times reported Monday.

Data compiled by the consultancy Duff & Phelps shows some $706 million in AML monetary penalties in the first six months of 2020, compared to a total $444 million in such fines imposed for all of 2019, the FT said. The most recent penalties stem from compliance lapses highlighted since 2015, including insufficient due diligence on new clients, improper management of AML measures, poor transaction monitoring and a failure to ensure adherence to the rules, the newspaper said.

The most frequently cited compliance violation: inadequate customer due diligence, which has been referenced in 115 sizable fines since 2015, the consultancy found.

“We see the same areas being sanctioned again and again,” Nick Bayley, head of UK regulatory consulting at Duff & Phelps, told the FT. “Despite the repeated messages in these enforcement cases, it’s clear that market participants are continuing to struggle with their obligations.”

The enduring problems reflect a lack of resourcing and upgrades to legacy systems, legal experts said.

“The root cause is always a lack of resources. AML resources are either not sufficient, or they are not allocated efficiently,” Anna Bradshaw, a partner at law firm Peters & Peters, told the newspaper.

While banks are overhauling their legacy systems and controls, the number of related fines handed down in the first half of the year signals that firms have yet to overcome the “inherent challenge in getting this right,” Alison Wilson, a partner at law firm Linklaters, said in the report.

The Duff & Phelps review found that AML fines still remained lower than the total issued in 2018, however–a sign that could reflect a shift in enforcement by the U.S. regulators.

“Despite the uptick in AML fine amounts in 2020, we are still seeing fewer massive fines being imposed in the United States,” Bayley told the FT. “It may simply be that the very largest financial institutions may be beginning to get their AML compliance in order, at last.”

Another factor behind the shift is more aggressive enforcement in other jurisdictions, and particularly within the European Union, according to Bradshaw.

“The increase in non-US fines will also reflect new powers, such as the French deferred prosecution agreements first deployed for AML failings by HSBC Private Bank in 2017 and more recently for AML failings by the Bank of China Limited,” she told the FT.

Earlier this year, the UK’s Financial Conduct Authority imposed a £38-million fine on the London branch of Commerzbank for failing to conduct adequate AML checks over a 5-year period. The penalty was the second-largest fine ever levied by the UK regulator for a firm’s failure to prevent the processing of suspicious transactions.

Read the full report here

RiskScreen: Eliminating Financial Crime with Smart Technology

Advance your CPD minutes for this content, by signing up and using the CPD Wallet

FREE CPD Wallet