Both local and international AML regulators including the European Union, FATF, and the Wolfsberg Group continued to put more efforts into fighting financial crime throughout 2020. The increase in financial crime has been largely due to easier access to financial instruments and gaps in emerging industries such as the crypto trading industry.
A closer look at the most recent penalties reveals a significant increase in amounts. In 2018, AML penalties gathered a staggering $4 billion but increased two-fold to $8 billion in 2019. In 2020, AML penalties were still on the uptrend, registering approximately $10 billion. One of the main reasons for the hefty fines is more often than not a failure to comply with AML regulations.
Other reasons included deficiencies in Customer Due Diligence, Know Your Customer, and Suspicious Transactions Monitoring procedures.
Hoping that these serve as a warning, here are some of the key penalties issued by AML regulators in 2020:
- 2 banks and 3 finance firms were fined in Sri Lanka for violating the Politically Exposed Persons (PEP) policies as well as being sanctioned for non-compliance with AML regulations as a result of inadequate screening and CDD procedures.
- Signet Bank of Latvia was fined 906,610 Euros for violating AML and anti-terrorism financing regulatory requirements.
- The Deutsche Bank New York branch was fined $216.1 million by the New York State Department of Financial Services for failure to comply with AML regulations and in connection with the bank’s correspondent relationship with the Danske Bank Estonia and FBME Bank.
- The Swedish SEB Bank was fined $107 million by the Swedish Financial Supervisory Authority (FSA) for providing inadequate AML measures in its subsidiaries in Baltic countries.
- The Commerzbank London branch was fined £37.8 million by the UK Financial Conduct Authority for failing to put adequate AML systems and controls in place.
- Guotai Junan Securities was fined $25.2 million by the Hong Kong Securities and Futures Commission (SFC) for failure to monitor customer transactions, delays in reporting processes, and violating AML regulations.
- BNP Paribas unit in China was fined $378,200 or 2.7 million Yuan by the Chinese Central Bank for failing to verify customer identity and report suspicious transactions. Still in China, the Minsheng Corp was fined 23.6 million Yuan and the China Everbright Bank 18.2 million for failure to ensure proper AML compliance.
- In Kenya, five commercial banks namely the KCB Bank, Equity Bank, Co-Op Bank, StanChart bank, and Diamond Trust were fined a total of $3.7 million for disruptions in the AML compliance processes and failure to report suspicious transactions.
- Mr. Green Casino was fined £3 million by the Gambling Commission for systemic AML failures including lack of proper risk assessment.
- And to finish with a grand finale, the Australian bank, Westpac was fined a whooping 1.3 billion by regulators for violation of AML and CTF rules.
Other notable recent enforcements include a fine of $507,375 to BitPay by the Office of Foreign Assets Control (OFAC) for failure to include location data in the company’s transaction monitoring program.
The Israeli Fintech company, Payoneer, was also fined $1.4 million by the US Treasury for processing payments by sanctioned parties in Sudan, Iran, and Syria.
Importance of Sanctions Screening Software
Identity verification violations, such as in the case of Payoneer, could easily have been avoided if the company had used the right sanctions screening software.
According to the OFAC’s framework for compliance commitments, sanctions screening software faults appear as one of several specific root causes of sanctions compliance program breakdowns or deficiencies. At times, OFAC has finalized enforcement actions against organizations that failed to incorporate updates to the sanction lists or did not account for alternative spellings of prohibited countries or parties.
We project that these fines will keep growing as risks are mounting with the digitalization of financial services, the spread of DeFI and the boom of NFT / Crypto trading. Very often, progress comes at the expense of proper risk assessment, and thus regulators are taking a tough stance against all the new financial organizations, limiting their business or outright outlawing large parts of their operations.
Both new Fintech and old banks have to up their game when it comes to protecting their customers, the market, and their shareholders by following strict CDD/KYC and AML protocols. These procedures are not optional and should be enforced at the highest level and with all seriousness.
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It is also important to have a sound balance between safe customer acquisition and fast onboarding allowing you to implement automated Fintech Risk Scoring. Again, with Screena, you can verify identities and match names at 99.999% accuracy while accelerating customers’ onboarding and eliminating inefficient, slow, risk screening practices.
Don’t wait for a fine to be imposed, contact us today to learn more about the scientific approach behind Screena’s AI-powered Due Diligence and KYC screening.