Recently released findings from client lifecycle management (CLM), know your customer (KYC) and transaction monitoring specialist Fenergo indicate a 31% increase in the global value of penalties for anti-money laundering (AML) violations, compared to the same period in 2023. The findings underscore a significant rise in enforcement actions, particularly in the Asia-Pacific region, where penalties surged by a staggering 266%, reaching over $46 million.
Regulators across the globe issued 80 fines for AML non-compliance, totalling more than $263 million, primarily for breaches related to KYC protocols, sanctions, suspicious activity reports (SARs), and transaction monitoring. This marks a significant uptick from the previous year’s first-half penalties, which amounted to $201 million. The trend reflects a growing determination among regulators to clamp down on financial misconduct, with significant implications for firms globally.The findings show the two largest fines imposed by the US Office of the Comptroller of the Currency (OCC), for multiple compliance failures including KYC, AML and risk management.
A civil penalty of $75 million was levied against a tier-1 US bank’s “failure to meet remediation milestones and make sufficient and sustainable progress towards compliance with a 2020 Consent Order” The regulator noted that “While the bank’s board and management have made meaningful progress overall, including taking necessary steps to simplify the bank, certain persistent weaknesses remain, in particular with regard to data.”
In another case a U.S. subsidiary of a Canadian bank faced a fine of $65 million after the OCC found deficiencies in its operational, compliance, and strategic risk management controls, citing Bank Secrecy Act (BSA) and AML deficiencies among others. These cases highlight the increasing severity of penalties tied to compliance failures.The findings highlight an 87% rise in AML-related fines, which totalled $113.2 million. Transaction monitoring and SAR breaches saw fines soar to $30.5 million, up from $6 million in the previous year. Similarly, penalties for non-compliance with regulations concerning politically exposed persons (PEPs) hit $26 million, while KYC-related fines doubled to $51 million.
Banks bore the brunt of these enforcement actions, incurring fines of $136 million, followed by digital asset providers with $49.3 million, payments firms at $40 million, and private banks at $32.1 million.
Rory Doyle, Head of Financial Crime Policy at Fenergo, emphasized the urgency for financial institutions to bolster their compliance frameworks. “With regulators deploying advanced technology to detect and penalize misconduct, the surge in enforcement actions we’ve seen in the first half of 2024 is likely just the beginning,” Doyle remarked.
The findings note that historically, second half of the calendar year sees an uptick in enforcement actions, with financial institutions often looking to quickly settle fines with regulators ahead of year-end reporting.
Doyle further warned that as the year progresses, institutions that fail to fortify their defences could find themselves facing hefty fines. “The importance of integrating smarter financial crime technology cannot be overstated, especially as the industry grapples with a talent shortage in this critical area,” he added.
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