Lessons from the biggest AML fines of 2020, so far.

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Lessons from the biggest AML fines of 2020, so far.

Regulators around the globe have imposed bigger fines for anti-money laundering failures in the first half of 2020 than they did in the whole of 2019, research shows. What are the factors at play here?

According to recent data put together by Duff & Phelps consultancy, some $706 million have been imposed in AML penalties in the first half of 2020. Compare that to just $444 million in such fines for all of 2019 and a curious picture emerges. Especially if you take into consideration that the share of the US in the total AML fines declined to 12%, as opposed to 45% in 2019.

It appears that regulators in other jurisdictions, particularly within the European Union, have become more aggressive with their AML oversight. Let’s take a look at some notable cases.

United Kingdom

At the start of the year, the Gambling Commission (a dedicated British regulatory body) fined an online casino named “Mr. Green” for £3 million for AML violations. “Mr. Green” became the ninth gambling business in the UK to face an AML penalty.

A month later, the UK's Financial Conduct Authority (FCA) fined the Commerzbank London branch for £37.8 million as a penalty for failing to comply with state AML procedures.

Sweden

In June of 2020, the Swedish Financial Supervisory Authority (FSA) fined the SEB bank conglomerate for 1 billion Swedish krona (approx. $107 million) for failing to provide adequate anti-money laundering (AML) measures at its subsidiaries in the Baltic countries.

Hong Kong

Also in June, Hong Kong's Securities and Futures Commission (SFC) imposed a $25.2 million fine on one of the largest investment banks in China -- Guotai Junan Securities. The reasons for the penalty? Failure to regularly monitor customer transactions and delays in reporting processes.

Sri Lanka

Meanwhile in Sri Lanka the Financial Intelligence Unit fined 2 banks and 3 finance companies for breaking their AML obligations. FIU named violations of Policy Exposed Persons (PEPs) and failure to perform sanction screening as chief reasons for the penalties imposed. The fine totaled 6 million rupees.

Lithuania

July saw the Financial and Capital Market Commission (FCMC) of Lithuania impose a fine of 906,610 Euro on Signet Bank for violating local anti-money laundering and anti-terrorism financing regulatory requirements.

Australia

And finally, in September 2020, regulators have fined Australian bank “Westpac” for a record-breaking $1.3 billion. Reasons for the penalty include Westpac's violation of AML rules and failure to implement advanced customer due diligence on suspicious transactions.

What can we learn from this?

Financial institutions face stricter scrutiny
Banks, payment processors and various fintech businesses are the primary targets of money launderers and thus are of particular interest to regulators. Non-compliance with AML legislation puts them at higher risk of hefty fines and sanctions.

Businesses of all sizes can be affected
If you run a startup, the larger fines listed can give you a false sense of security. You think regulators have bigger fish to fry? Think again. The truth is, failure to screen your transactions is even more dangerous for small and mid-sized businesses. Not only can you fall prey to criminals, but you’d be subject to the same strict penalties, once your failure to comply with AML legislation is uncovered.

AML fines can hurt your reputation and your bottom line
A large AML fine can prove ruinous to a business. Back in 2019, a top Swiss bank received a penalty of $5.1 billion for AML, KYC and sanctions violations. As it turns out, this sum exceeded the bank’s 2018 net profit of $4.9 billion. But even if a fine does no major damage to the bottom line, it can still hurt the company’s reputation should the information become public.

How can you protect your business?

The dawn of technologies like artificial intelligence (AI) and machine learning has taken compliance screening to a whole new level in the last couple of years. No longer are businesses bound to the legacy rule-based systems that need constant manual tweaking and updates in order to stay up-to-date.

That’s where platforms like DataSpike have value to offer. DataSpike’s database lists 3 million unique entries with new ones being added daily. Thanks to our state of the art machine-learning algorithms, your PEP and Sanctions screening will never be out of date or inaccurate ensuring airtight AML protection.

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