Financial institutions and companies that operate in regulated industries are closely monitored by regulators. This is because of their high risk of aiding money laundering activities intentionally or unintentionally, both of which are not excuses according to the law. Instead, regulators expect these institutions to set up Anti Money Laundering (AML) programs to combat fraud, terrorism funding, money laundering and other related crimes.
In a situation where the financial institution fails to comply, punishments are imposed and 2021 was one of the years where the largest fines were dished out. Who are the biggest offenders and why were they penalised? Let’s get right into it.
Why are Financial Institutions Punished by Regulatory Bodies?
Some of the most common reasons why regulatory bodies punish financial institutions include:
- Failure to implement efficient compliance culture, ethics, values and structure
- Poor risk assessment through KYC, PEP, CDD and AML
- Failure to report suspicious Activities (SARs)
- AML control vulnerabilities due to poor structure
Top 10 Anti-Money Laundering (AML) Fines of 2021
Fine - $700 Million
The Malaysian bank, AmBank was found guilty and agreed to pay the Malaysian government $700 million after uncovering its part in the 1MDB scandal. Former Malaysian prime minister, Najib Razak was found guilty of money laundering, seven counts of criminal breach of trust and abuse of power in the scandal. The Saudi royal family paid $681 million to Najib Razak in one account.
Key Takeaway: Banks should carefully monitor the politically exposed persons they do business with to detect suspicious activities. Once detected, a suspicious activity report (SARs) should be filed immediately.
2. ABN Amro
Fine - $574 Million
ABN Amro was found wanting in their AML activities and agreed to pay $574 million as part of their settlement with prosecutors. This was due to their inadequate Know Your Customer (KYC) checks, lack of customer activities, risk classification and failure to report suspicious customer activities.
Key Takeaway: Banks should establish an effective AML program with end-to-end control and real-time risk classification and transaction monitoring.
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3. Deutsche Bank
Fine - $130 Million
The Deutsche Bank agreed to pay approximately $130 million after being found guilty of violating Foreign Corrupt Practices Act (FCPA). After investigations, the US Security and Exchange Commission (SEC) concluded that the bank paid more than a million dollars in bribes to consultants to scale its global operations.
Key Takeaway: Relevant anti-bribery policies should be put in place to tackle potential in-house criminal activities.
4. Capital One
Fine: $390 Million
Capital One was found guilty of violating the Bank Secrecy Act and was fined by the U.S Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). After investigation, FinCEN uncovered that Capital One failed to report thousands of suspicious activities and transactions. This spanned from 2008 to 2014, when millions of dollars went unreported by their now defunct Cash Checking group despite being aware of criminal charges against certain customers, including an organized crime syndicate.
Key Takeaway: Always report suspicious activities no matter how profitable the transaction appears as the consequences could be great.
5. Bank J. Baer
After instigation and charging to court, Julius Baer admitted to scheming to bribe FIFA officials with about $36 million. The Swiss bank was fined $79 million for its role in the FIFA money laundering case.
Key Takeaway: money laundering and corruption can result in heavy fines. Always review high-value transactions from high-risk customers to ensure AML compliance.
6. DNB ASA
Fine: $48.1 million
DNB ASA, Norway’s largest lender was fined approximately $48 million for noncompliance with AML regulations after initial inspections the year before, 2020, by the financial regulatory authority. Prior to that, they had initially come under scrutiny for allegations of moving millions to shell companies. This was done on the behalf of Samherji, one of Iceland’s fishing companies.
Key Takeaway: Appropriate KYB should be performed to verify whether a company is real or not before establishing a business relationship with them. Robust risk control procedures should also be implemented for customers from high-risk industries.
Fine: $100 Million
BitMex agreed to pay a $100 million dollar fine for cryptocurrencies without regulatory authorisation and breaking AML standards, to the Commodities Futures Trading Commission (CFTC) and Financial Crimes Enforcement Network (FinCEN).
After investigations, it was discovered that BitMex facilitated unlawful transactions through the darknet market and unlicenced money service organisations amounting to over $209 million.
Key Takeaway: Conducting illicit transactions and improper customer KYC data collection and verification can result in heavy fines.
8. Apple Bank For Savings
Fine: $12.5 Million
Apple Bank For Savings was judged to violate the Bank Secrecy Act (BSA) by the Federal Deposit Insurance Corporation (FDIC), along with failing to comply with an FDIC consent order issued based on BSA/ AML breaches. This led to a $12.5 million fine.
Key Takeaway: Banks need to establish a culture and operational procedures for adequate risk assessment for customers, channels, products and operational jurisdictions.
8. Robin Hood
Fine: $30 Million
Robin Hood was fined $30 million by the New York State Financial Regulators after the crypto trading platform was caught lacking in the areas of cybersecurity and transaction monitoring compliance requirements.
Key Takeaway: Crypto trading platforms need to establish robust cybersecurity protocols and real-time transaction monitoring for AML compliance.
Fine: $5 Million
The bank was fined $5 million by the BaFin for failure to file 50 suspicious customer activities between 2019 and 2020. Prior to this, N26 had been cautioned and assigned a specialist to supervise its KYC compliance and AML activities.
Key Takeaway: Detecting suspicious activities is not enough. It is important that financial institutions report them too as soon as possible.
Fine: $1.4 Million
One of the leading providers of global online money transfer and digital payment services, Payoneer was fined and agreed to pay $1.4 million to the US Treasury Office of Foreign Assets Control for violating 2,260 sanctions. The company was found to have handled payments from sanctioned countries including Sudan, Syria, and Iran.
Key Takeaway: Financial institutions should regularly evaluate and optimise their transaction screening system to avoid penalties.
Achieving AML Compliance With Youverify
From ignoring AML compliance laws to illegal company activities, several institutions came under heavy AML fines in 2021. Regulators are looking to restrict the illegal flow of cash, therefore, increasing the pressure and scrutiny on financial institutions. This is why your compliance solution as a business needs to be able to keep up with the constantly evolving regulatory landscape and the nature of criminal activities.
Robust KYC, screening for PEPs and adequate customer risk assessment and classification should be part of your company AML policy. Real-time transaction monitoring and Know Your business solution is also very critical.
Youverify’s compliance software solution was designed to help you manage all of this in one place, satisfying compliance requirements while saving cost, and labour, and not having to slow down business operations.
See how 100+ leading companies use YV OS for KYC and AML screening of customers for compliance and real-time risk detection. Request a demo today.