Still early in the second half of 2023, but the fintech world has experienced some notable breaches that required fines, and of course, lessons have to be learned from these events. We think it further iterates the importance of compliance measures not only for consumers and users but for companies. Helping reduce costs and saving the company's reputation. In this article, a couple of notable compliance fines in 2023 will be discussed, as well as lessons that can be learned from them, including AMl and FCA fines.


Why Are Fines Imposed For Non-Compliance?

Fines are imposed for a number of reasons, one of them is deterrence. Compliance fines serve as a deterrent; this means that it discourages companies from engaging in activities that violate the laws, regulations and industry standards. There are a lot of companies springing up, and they may be looking for ways to cut processes and save cost and time to the detriment of consumer or their security in fact. 


Financial penalties are intended to establish a strong incentive for corporations to prioritise compliance and prevent conduct that could harm consumers, impair market integrity, or risk the financial system's stability.


Compliance fines are intended to promote equity and safeguard stakeholders' interests. Regulatory frameworks are intended to level the playing field and ensure that all parties follow the rules. Companies that do not comply gain an unfair edge over conforming competitors, potentially leading to market distortions and lower customer trust. Imposing fines helps to correct this mismatch and maintain industry fairness.


Fines serve as a form of accountability. When firms are held financially liable for non-compliance, it sends a clear message that there are repercussions for their behaviour. This accountability can help rebuild public trust in the financial sector by demonstrating that regulatory bodies are actively monitoring and enforcing compliance standards. 


Additionally, fines can act as a means of compensating affected parties. In cases where non-compliance results in harm or financial losses to consumers or other stakeholders, the fines collected can be used to provide restitution or support initiatives that benefit those affected.


Notable Fines Recorded So Far In 2023 And Lessons To Learn From Them


The total amount of major FCA fines issued in 2023 is about £29 million. With only four penalties handed out thus far, each penalty has been quite notable. Other types of fines have been quite notable as well, involving household and notable names.


1.  Banque Havilland S.A ( £10m)


The FCA fined private bank Banque Havilland £10 million after discovering that the bank was behind a paper proposing methods aimed at harming the Qatari economy. The procedures included techniques for creating a false image of the Qatari market through manipulative trading activities.


Banque Havilland's goal is thought to have been to depreciate the Qatari Riyal, and the FCA has indicated that the bank committed a financial crime.


In addition, the FCA levied separate fines on three former employees of the bank's London branch who were engaged in the document's creation and distribution. Former CEO Edmund Rowland, David Weller, and Vladimir Bolelyy have also been barred from working in the UK financial services sector.


Lessons Learned


The event iterates a lesson that financial institutions should remain independent and stay clear of market manipulation. It also emphasises that financial companies need to be accountable for regulatory oversights and will always be under different levels of territorial oversights. It also shows that non-compliance like that of Banque Haviland can cause reputational damage.


2. Guaranty Trust Bank ( £7.8m)


GT Bank's united kingdom subsidiary faced significant compliance failures between October 2014 and July 2019, for which it was fined, as identified by the Financial Conduct Authority (FCA). The bank failed to conduct adequate customer risk assessments and neglected to assess or document money laundering risks associated with its customers. 


Additionally, it did not meet the required standards for monitoring customer transactions and business relationships. Despite repeated warnings from internal and external sources, including the FCA, GT Bank failed to take appropriate action to address these weaknesses. Consequently, in early 2018, GT Bank ceased taking on new customers and later agreed to voluntary restrictions on its business operations due to ongoing concerns raised by the FCA. These restrictions remained in effect until mid-2021 when they were lifted after the bank completed a remediation plan verified by an independent third party.


The FCA emphasises the necessity of effective anti-money laundering (AML) controls for financial institutions. It requires firms to have robust AML measures in place to mitigate the risk of individuals and organisations using the financial system for illicit purposes. 


Mark Steward, the FCA's executive director of enforcement and market oversight, stated that GT Bank should have promptly implemented adequate AML controls following a previous fine in 2013. However, the bank's failure to do so resulted in prolonged exposure to financial crime risks, endangering both GT Bank and the broader market. However, GT Bank qualified for a 30% penalty reduction because they did not contest the FCA's findings.


Lessons Learned


This event highlights the critical importance of compliance with regulatory obligations and taking to reprimands. It is important to pay heed to warnings and regulatory oversights and rules. It is risky to downplay compliance procedures. Continuous monitoring and improvements should be prioritised.


3. Al Rayan (£4.02)


In January, the FCA imposed a fine on Al Rayan Bank worth £4.02 over loose or non-stringent AML controls. Between 1 April 2015 and 30 November 2017, the financial institution failed to conduct adequate checks on funds transferred through the bank. According to the FCA, the shortcomings were worsened by a lack of adequate staff training, which increased the possibility of money laundering and financial crime.


Al Rayan is entitled to a 30% discount because it chose to settle rather than challenge the FCA's findings. Without the decrease, the fine would have been £5.74 million. 


Lessons Learned


It is important to employ robust AML measures in very financial institutions, especially banks. Staff should be trained and made aware of AML regulations; this will aid compliance with regulatory standards, as it is always important that compliance regulations are complied with. Furthermore, it is sometimes beneficial to opt for a settlement rather than dragging a court case for months and, most possibly, years.


4. Meta ($1.3 Billion)


In May 2023, Meta was fined $1.3 Billion for violating the European Union data protection rules. The penalty, which was announced by Ireland's Data Protection Commission, might be one of the most significant actions taken in the five years since the European Union implemented the landmark General Data Protection Regulation. 


Meta failed to comply with a judgement by the European Union's highest court in 2020 that Facebook data transferred over the Atlantic was not adequately secured from American espionage agencies. Meta claimed it was unfairly singled out for data-sharing procedures employed by thousands of businesses.


Lessons learned


  • The importance of data protection should not be downplayed.
  • Laws surrounding a product's services, as well as regulations, should be thoroughly researched.
  • Companies need to be updated on regulations concerning compliance.
  • Even tech giants need to be accountable too.
  • Controversies and difficulties surrounding international data transfers need to be clarified by concerned agencies and governments to avoid future disputes.  
  • Meta's claim of being unfairly singled out highlights the importance of fairness and accountability in data protection. Organisations that perform regulatory oversight should employ fairness and integrity in their operations.


Recommended - Ultimate Guide to Compliance Safety for Tech Businesses in the UK


5. Binance VS SEC


Barely three weeks ago, the US government agency, the Securities and Exchange Commission, sued Binance, which is the largest crypto exchange in the world, and its founder, Changpeng Zhao. There are a total of thirteen charges filed. The SEC claimed Zhao and Binance allegedly conspired to get around "their own controls" so as to let high-net-worth US investors and consumers continue trading on Binance's unregulated foreign exchange. 


According to the SEC, Binance acquired $11.6 billion in revenue between June 2018 and July 2021, the majority of which came from transaction fees. The exchange has "at first overtly and later furtively"  attempted to entice US consumers since its inception, according to the SEC, under the leadership and oversight of its creator Zhao. The company also encouraged users to use VPN software to change their locations in order to use the platform, as well as submit documents to deny their country of origin or residence.


Zhao responded to the allegations on Twitter by tweeting "4", a well-known phrase in Binance's community encouraging users to put aside fear, uncertainty, and doubt, or "FUD." an official blog post was also posted on the Binance company blog, condemning SEC's action. SEC holds that Binance has blatantly ignored federal laws. According to sources, Binance has also been accused of misusing funds and misleading customers to believe that they can detect market manipulation.


Lessons To Learn


  • Although Binance is a global platform, it is important that companies aim to comply with the regulations of territories in which they hold subsidiaries.
  • AML and KYC regulations apply even in the crypto world; regulatory oversights are constantly monitory operations in the best way they can.
  • This event highlights the importance of user protection and investor safeguards in the cryptocurrency industry. Crypto exchanges and platforms must implement robust controls, compliance measures, and due diligence processes to protect users and ensure adherence to regulatory standards.
  • This event stresses the continued need for regulatory clarification and guidance in the cryptocurrency industry. The dynamic nature of cryptocurrencies and digital assets presents issues for regulators, and a lack of clear restrictions can generate confusion for market players. Clear norms and regulatory frameworks are required to support responsible and compliant behaviour while supporting innovation and growth in the crypto business.


6. Coinbase ( $50m)


In January 2023, a  $50m fine was imposed on Coinbase; in addition, the company has been required to invest an additional $50 million in its compliance program over the next two years.


DFS discovered that Coinbase's Bank Secrecy Act/Anti-Money Laundering program, as well as its, know your customer/customer due diligence (KYC/CDD), transaction monitoring system (TMS), suspicious activity reporting, and sanctions compliance systems, were "inadequate for a financial services provider of Coinbase's size and complexity." According to the Department of Financial Services, these oversights exposed Coinbase to "serious criminal conduct," such as fraud, money laundering, suspected child sexual abuse material-related activity, and probable narcotics trafficking.


FDS claims Coinbase couldn't manage to keep up with the large number of alerts generated by its TMS, leading to a "significant and growing backlog" of over 100,000 unreviewed transaction monitoring alerts by late 2021.


Lessons Learned


  •  The event emphasises the importance of having an adequate Bank Secrecy Act/Anti-Money Laundering (BSA/AML) program in place, especially for financial services providers like Coinbase.
  • Coinbase's inability to effectively manage the large volume of alerts generated by Coinbase's transaction monitoring system (TMS) highlights the importance of having scalable and efficient monitoring processes.
  • It is necessary to make budgets that are robust enough to accommodate adequate compliance measures.


7. HSBC, Scotia Bank


in May, SEC imposed fines for extensive recordkeeping violations caused by workers' usage of personal devices and applications for business communications. HSBC Securities Inc agreed to pay a $15 million settlement to the Securities and Exchange Commission (SEC). Scotia Capital agreed to pay a total of $22.5 million: $15 million to satisfy Commodity Futures Trading Commission charges and $7.5 million to settle Securities and Exchange Commission penalties.


Lessons Learned


  • The fines imposed on HSBC and Scotia Bank emphasise the importance of proper recordkeeping in the financial industry.
  • The incidents highlight the importance of financial institutions efficiently monitoring and supervising employee interactions, particularly when personal devices and applications are used for business reasons.
  • Non-compliance, no matter how unimportant it may seem, has costs that can be severe, including financial costs, of course.
  • Compliance culture should be cultivated within work environments.


Read Also - Ultimate Guide to Building a Finance Startup In The US


8. William Hill ( £19.2m)


William Hill and its sibling company Mr Green were fined a record £19.2 million for failings in social responsibility and anti-money laundering. Failures included allowing a consumer to open an account and spend £23,000 in 20 minutes without any checks. Other users were able to spend £18,000 in 24 hours and £32,500 in two days with no income proof or AML checks. Customers were permitted to deposit large sums of money, which they later lost, without any anti-money laundering checks. Many extreme incidents occurred during the lockdown, despite the Gambling Commission warning firms not to take advantage of vulnerable people during this time. 


Lessons Learned


  • The fines levied on William Hill and Mr Green demonstrate the significance of social responsibility in the gambling industry.
  • The case highlights the importance of rigorous AML procedures within the gambling industry. Gambling companies are not excluded from compliance procedures.
  • Adequate due diligence checks should always be implemented, even in the gambling industry.


Achieving AML Compliance with Youverify


Automating your AML compliance processes is easily the best way to achieve compliance and avoid heavy fines and reputational damage. With Youverify,  businesses can automate their compliance processes from start to finish, helping them remain compliant and spot potential breaches before they occur. 


Youverify empowers businesses to perform real-time business verification, transaction monitoring, adverse media screening and overall AML consultation to keep them in the right. 


See how 100+ leading companies use Youverify for KYC and AML screening of customers for compliance and real-time risk detection. Request a demo today.


Bottom Line 


Judging from all the cases discussed above, Non-compliance and downplaying compliance procedures attract a lot of consequences, such as legal battles, costly fines imposed by regulatory oversights, reputational damage and loss of customers and clients or investors. 


Businesses must know that compliance is more than just checking boxes; it is a commitment to ethical standards and responsible behaviour. Organisations can protect themselves from the negative repercussions of non-compliance by proactively developing comprehensive compliance systems, conducting extensive risk assessments, and regularly monitoring and adjusting to regulatory changes.