AML Fines - 2020 Update

In 2019, global financial authorities handed down an unprecedented amount of money laundering fines, amounting to around $8.14 billion (including fines imposed for historic offences). While regulators in the United States and the United Kingdom were the most active, penalties were issued by authorities in jurisdictions around Europe, Asia, and Oceania. In 2020, that trend is set to continue: as of October 2020, according to the Finbold’s Bank Fines 2020 report, global authorities issued $13.74 billion in AML fines, with three large US banks, Goldman Sachs, Wells Fargo, and JP Morgan Chase accounting for over half of that total.

Despite the figures for 2019 and the first half of 2020, global AML fines were actually down on totals from 2018 and 2017, and lower than the annual average fine between 2015 and 2018 ($1.8 million). The drop in the value of fines between 2018 and 2019 was accompanied by only a relatively minor 14% drop in cases: rather than being indicative of regulators becoming less aggressive towards AML failures, observers suggest that larger financial institutions are actually responding to regulatory objectives and improving their compliance performance.

Despite the sense of improved performance on the part of financial institutions, between 2015 and 2020, certain key global AML failures have occurred consistently. These failures involve:

• 115 cases of customer due diligence
• 109 cases of AML management
• 82 cases of suspicious transaction monitoring
• 62 cases of compliance monitoring and oversight

AML Fines 2020: Key Takeaways

Key moments and takeaways from global AML fines and enforcement actions in 2020 include:

The United States: Major AML enforcement actions by US authorities in 2020 included a $150 million fine of Deutsche Bank for a lack of oversight in the Jeffrey Epstein scandal, a $900 million fine for Israel’s Bank Hapoalim for tax evasion and money laundering, a $60 million fine for Bitcoin mixer Helix for money laundering, and a $38 million fine for Interactive Brokers LLC for significant BSA/AML compliance failures. Prior to June 2020, the United States’ total share in AML fines amounted to 12% of the global total – down from 45% in 2019. The enforcement actions also reflect authorities’ attitudes to the criminal threat posed by cryptocurrencies to the financial system.

The United Kingdom: The UK follows the US in issuing the second-highest amount of AML fines in 2020. In June, the UK’s FCA issued a $47 million fine to German bank Commerzbank after it was found to have made serious customer due diligence compliance failures between 2012 and 2017. In October, the FCA fined investment bank Goldman Sachs $126 million for risk management failures relating to Malaysian development company 1MDB.

Europe: In 2020, the European Union’s AML enforcement activities reflected the aggressive approaches of the US and the UK. In June 2020, working in coordination with authorities in Estonia, Latvia, and Lithuania, Sweden’s FSA issued a $107 million fine to SEB bank for failing to implement adequate AML measures in its subsidiary organizations. In October 2020, prosecutors in Frankfurt, Germany, fined Deutsche Bank over $15.9 million for the late submission of suspicious activity reports relating to the money laundering scandal at Danske Bank A/S. The enforcement actions in Europe took place against the backdrop of the recently implemented 5AMLD while new AML regulations are on the horizon: the EU’s 6AMLD will come into effect across the bloc in June 2021.

Global Regulation: In Malaysia, fallout from the Goldman Sachs scandal resulted in the bank being fined a further $2.5 billion and ordered to return $1.4 billion in assets. The enforcement actions of Malaysia join those of China, Hong Kong, Singapore, Taiwan, India, and Pakistan, which together issued almost $4 billion in AML fines. Pakistan’s fines rose by 845% over 2019 in what was a reaction to the FATF pointing out strategic deficiencies in its AML/CFT regime.

2020 saw significant enforcement actions in numerous global jurisdictions. In March 2020, Kenya fined 5 commercial banks $3.75 million for disruptions to their AML processes, in June, Hong Kong’s SFC issued a $25.2 million fine to Guotai Junan Securities for AML monitoring failures, and in September Australian bank Westpac was fined a record $1.3 billion for its failure to implement effective customer due diligence and transaction monitoring measures.

Ongoing Regulatory Focus

The patterns of AML failures in 2020 highlight the ongoing challenges that firms in every part of the world face in engaging money launderers, while outlining key areas in need of greater compliance scrutiny. Enforcement activities and new legislation in the US and Europe demonstrate the shift in regulatory focus onto cryptocurrency service providers along with a concern for new types of fintech related money laundering methodologies. Similarly, repeated failures in transaction monitoring suggest a need for firms to implement faster and more robust alert procedures to ensure that SARs are sent to authorities in a timely manner.

AML Fines and Compliance Processes

Finally, the growing complexity of AML compliance means that firms are increasingly implementing technological solutions to complement their AML processes, including integrating artificial intelligence and machine learning models capable of managing the vast amounts of data that their regulatory obligations entail.