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Global Regulators Fine Firms $5.6 Billion So Far This Year - Fenergo

Tom Burroughes

18 August 2020

Financial institutions around the world have so far in 2020 paid $5.6 billion in penalties for breaching anti-money laundering rules, know-your-client tests and sanctions. The rise in punishments was particularly marked in Asia, figures show.

The mid-year report comes from , which provides digital transformation, customer journey and client lifecycle management. The figures are up to the end of July. (This publication has asked the firm about specific previous year comparisons, and may update in due course.)

Asia-Pacific regulators’ fines rose to almost $4.0 billion, when looking at regions as a whole. Financial institutions in the US, Sweden, Germany and Israel were hit hardest, Fenergo said, noting high punishments meted out by regulators in Malaysia, linked to the ongoing scandal of the state-created that included a $2.5 billion penalty and the guaranteed return of $1.4 billion in assets. 

Besides Malaysia, other regulators in Asia imposing punishments were those in China, Hong Kong, Singapore, Taiwan, India and Pakistan.

Countries where fines have increased substantially include Pakistan (845 per cent rise compared with 2019 mid-year), Hong Kong (+223 per cent) and Taiwan (+116 per cent); they are the result of increased enforcement actions in response to recent  criticisms and concerns highlighted in mutual evaluation reports. Pakistan is under increased scrutiny by FATF for having demonstrated strategic deficiencies in its AML/CTF regime, Fenergo said in its report.

The figures show how fines for miscreant firms have ballooned into the billions, underlining why AML and KYC tests are so critical for global wealth management. 

"While we are seeing a 30 per cent 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 $8.4 billion,” Rachel Woolley, global director of financial crime at Fenergo, said. “We can also expect to see additional penalties issued in response to the 1MDB scandal as the US Department of Justice 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.”

North European bad actors
Three Swedish banks were fined $536 million 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 levied fines of over $900 million against an Israeli bank for tax evasion and money laundering after discovering that the bank had concealed more than $7.6 billion in Swiss and Israeli bank accounts. The Israeli bank was also fined by the DoJ for its role in a money laundering conspiracy surrounding the Fédération Internationale de Football Association (FIFA). In addition, a fine of $150 million was issued by the NYDFS to a well-known German bank for its links to the late financier, who died in jail, Jeffrey Epstein.

As reported by Fenergo several months ago, between October 2018 and December 2019, regulators across the US, Europe, APAC and the Middle East levied more than $10 billion in financial penalties against financial institutions for AML/KYC and sanctions-related violations and a further $82.7 million for data privacy and MiFID violations. For AML, KYC and sanctions violations, global financial institutions have paid out over $36 billion in fines since the financial crisis in 2008.

2019 was the second-highest year in history for fines with $8.4 billion levied against global financial institutions.