AML-related fines are increasing around the world, placing pressure on a growing number of countries to move to bring their anti-money laundering standards to more respectable levels. Several notable fines have been levied over the past month alone across Europe, further compounding a global trend that has seen tens of billions of dollars worth of penalties already levied against individual financial firms and entire markets since the turn of 2020. Many are expecting this movement continue over the next few years given the increasing range of sophisticated avenues being forged by financial criminals seeking to exploit the unexpected and underprepared for personal gain.
Both American and European in particular regulators continue to come down hard on banks that do not meet the EU’s staunch anti-money laundering standards. In spite of the COVID-19 pandemic of 2020, regulators dished out a whopping $2.2 billion in AML fines, a significant uptick from the $444 million total issued in 2019. What is significant in these findings is that regulators issued the same number of AML enforcement actions (45) in 2020 as they did in 2019 – meaning the total cost associated with these actions are rising at an exponential rate, and for good reason. The need for continued compliance with AML regulations is no longer up for debate given the increasingly destabilizing nature of these illicit financial activities, and it appears that global watchdogs are increasing pressure on those failing to comply by upping the ante with respect to increasing the scope of fines. Early findings from 2021 have indicated that Europe may be in the midst of another record-breaking year, as $994 million in fines spread over 17 separate actions against various financial institutions have already been issued as of September 30th. 3Several colossal individual fines, including $390 million levied against Capital One alone over multiple violations of the Bank Secrecy Act (BSA), mark these totals. In the past, larger financial institutions could simply absorb AML fines as a cost of doing business. However, with regulators increasing these gross monetary totals, big banks can ill afford to cut corners with respect to following regulatory guidelines.
German digital bank N26 found this out the hard way this past week, being fined $5 million over the delayed submission of suspicious activity reports. Back in May, N26 was ordered by a regulator to implement safeguards to prevent terror financing and money laundering, while also closing any available loopholes in their IT monitoring/CDD processes. It seems N26 ran out of time as they were finally hit with penalties. N26 issued a statement in response to fine, noting that the firm “takes its responsibility in the fight against the growing threat of global financial crime, and in the prevention of money laundering, very seriously.”1 Another European bank fined millions this week was Pilatus Bank in Malta. They were hit with a €4,975,500 fine by watchdog FIAU for “very serious and systemic” failures in the bank’s obligation to guard against financial crime. FIAU identified 11 red flags that Pilatus Bank ignored. It was found that much of the client information they had on file from their onboarding process differed significantly from their clients’ actual transaction activity. The bank did not investigate or file any sort of suspicious activity reports despite these inconsistencies. The FIAU also reported that Pilatus relied on generalized information instead of specifics when it came to their clients; which is not enough to create an accurate risk profile. There were also shady loans being offered by the bank in which they were concealing the source of the funds where there was no real financial benefit to the bank to even offer the loans.2
In a different case, it was not a European bank but rather a lottery organization, which took a hit for AML infractions. The United Kingdom Gambling Commission (UKGC) took action against EU Lotto with a fine worth £760,000 fine ($1 million) for AML failures, while also forcing the group have to undergo “extensive independent auditing.” Much like its counterparts in the banking sector, EU Lotto too had plenty of warning before getting fine, receiving a formal notice way back in October of 2019 after neglecting previous UKGC’s guidance.4
Financial institutions worldwide should learn from the respective failures of these other companies so that they can avoid the same costly fate. Financial institutions should always take advice from regulators seriously, and if an organization does happen to receive a formal notice of warning, remediation action should be taken immediately. It appears that fines will only continue to increase moving forward and regulators/watchdogs are not being lenient for AML failings during the COVID-19 pandemic.
- Frankl, Ed. “N26 Fined for Delayed Money-Laundering Reports by German Finance Regulator.” The Wall Street Journal, Dow Jones & Company, 29 Sept. 2021.
- Meilak, Nicole. “Pilatus Bank Hit with €5 Million Penalty by FIAU.” MaltaToday.com.mt.
- Nicodemus, Aaron. “Pandemic Not Slowing Rising AML Fine Totals, Report Says.” Compliance Week, 25 Aug. 2021.
- Yogonet. “EU Lotto Fined £760k by UKGC for Social Responsibility, AML Failures.” Yogonet, Yogonet, 24 Sept. 2021.