Anti-money laundering and know your customer fines in 2020 totalled $5.6bn so far

The total value of fines issued so far in 2020 against companies failing to comply with anti-money laundering and know your customer rules totalled $5.6bn, with APAC regulators dramatically increasing their sanctions.

Fenergo, the digital transformation and customer journey solutions provider, revealed the figures in new research that showed the values of the AML and KYC fines around the world in the year up until the end of July.

Fenerego found that fines issued by APAC regulators related to AML and KYC violations saw a dramatic increase from $3.5m to almost $4bn.

Regulators in Malaysia issued two of the highest value enforcement actions in 2020 thus far. In July, Goldman Sachs reached a settlement with the country’s regulators for its role in the 1Malaysia Development Berhad scandal (1MDB scandal), which saw the theft of billions of dollars from a Malaysian government fund.

The deal meant that the bank would pay a $2.5bn penalty and the guaranteed return of $1.4bn in assets.

Financial institutions in the US, Sweden, Germany and Israel were hit hardest. Three Swedish banks were fined $536m collectively for lacking sufficient AML governance and controls in the Baltic states.

US authorities including the DoJ, the Federal Reserve and the New York State Department of Financial Services (NYDFS) levied fines of over $900m against an Israeli bank for tax evasion and money laundering after discovering the bank had concealed more than $7.6bn in Swiss and Israeli bank accounts.

The Israeli bank was also fined by the U.S. Department of Justice (DoJ) for its role in a money laundering conspiracy surrounding the Fédération Internationale de Football Association (FIFA). In addition, NYDFS issued a $150m fine to Deutsche Bank in July for its links to the late financier and sexual predator Jeffrey Epstein.

“While we are seeing a 30% reduction in the value of fines issued to date compared to the same analysis period last year, it is likely that the total enforcement actions issued in 2020 will be on par with, if not surpass, the 2019 total of almost $8.4bn,” said Rachel Woolley, global director of financial crime at Fenergo.

“We can also expect to see additional penalties issued in response to the 1MDB scandal as the [DoJ] investigation remains open. Although regulatory and supervisory activity may have been impacted by Covid-19, global regulators have reinforced the importance of vigilance and reporting of suspicious activity to ensure the detection and prevention of financial crime throughout the pandemic.

“As financial institutions continue to face operational challenges in the months ahead, they may struggle to stay on top of other fraudulent activity brought on by Covid-related initiatives, such as the US Paycheck Protection Program (PPP) loan program, which may result in enforcement actions later in the year and into 2021.”

Marc Murphy, CEO at Fenergo, added, “The current pandemic has created a raft of new challenges for financial institutions on a digitalisation level and yet our fines analysis is proof that the ball can’t be dropped when it comes to compliance. Regulators and government agencies globally are actively encouraging financial institutions to leverage technology that automates and streamlines KYC and AML compliance processes while improving customer experience.

“A solid digital-first strategy will better equip financial institutions to detect and prevent financial crime and deliver enhanced, digital customer experiences. Those that get it right will reduce the risk of being fined and emerge from the current crisis more resilient overall.”

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