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Anti-money laundering (AML) fines have already surpassed the total for 2019 in the first half of the year. Are firms failing to learn from their mistakes?

Anti-money laundering fines surged to $706 million in the first half of this year, compared to $444 million for the whole of 2019. That’s the finding of the seventh annual Global Enforcement Review from Duff & Phelps.

The figure shows a reversal of the trends from previous years which showed a steady decline, ($3,297 million for 2018 and 2017 for $2,136 million). However, according to Nick Bayley, Head of Regulatory Consultancy at Duff & Phelps, this new uptick doesn’t necessarily mean firms have stopped paying attention to AML issues.

“Despite the uptick in AML fine amounts in 2020 we are still seeing fewer massive fines being imposed in the United States. This is very unlikely to reflect regulators attaching any less importance to AML compliance, it may simply be that the very largest financial institutions may be beginning to get their AML compliance in order, at last.”

“Although we do see some big institutions repeatedly receiving major fines for their AML failings, the sheer size of the fines that have been imposed for these failings and the associated huge cost of remediation means many have seemingly now learned their lesson.”

Nick Bayley

Even so, he does acknowledge that the report showed multiple fines for the same offenses and that they have been cropping up time and time again.

“Interestingly, looking at the key AML failings that are identified by regulators, we see the same areas being sanctioned again and again. This is consistent for regulators across the globe and also over the past five years.”

Handling AML regulation has been one of the major challenges for most banks for quite some time now. Banks can face massive fines for breaches, up to approximately £4,5 million, or 10% of their total turnover.

USA

The USA saw a significant reduction in the value of fines. In 2018, regulators in the USA accounted for 58% of the total fines issued. This time around it was down to just 12%. However, the total number of fines remained the same, suggesting the US regulator had simply not issued some of the mega fines seen last year.

UK

Here in the UK, though, fines appear to have been down on last year to £36.6 million compared to £98.2 million for the whole of last year.

Regulatory intelligence

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Waymark Tech’s software has been developed to offer all of this and more. The implementation of artificial intelligence and natural language processing (NLP) has already saved large amounts of man hours and has alleviated serious risk. Moving away from the traditional approaches within the financial services sphere has seen Waymark grow since it was founded in 2016. Preparation for regulatory compliance is crucial in the avoidance of fines. If you feel that regulatory intelligence could be valuable for your organisation, please do email us for a complimentary and no-obligation demo of our innovative software at support@waymark.tech.

Lessons not learned

The figures are certainly mixed. They are well up on 2019 but still down on 2018 and 2017. As Bayley says, it’s perfectly possible that these simply show firms are finally beginning to get the message. However, the familiar nature of the failings suggests those firms who have not, are making the same mistakes time and time again.

In a year marked by the global pandemic, in which the challenges of maintaining compliance are higher and in which fraudsters are presented with a wealth of opportunities, those firms not paying close attention are playing with fire. This was demonstrated rather clearly with the $47 million fine for Commerzbank which was found to have failed to put right problems despite repeated warnings from the regulator. (See our article on this here).

These failings occurred at a time when defending against fraudsters and money launderers was comparatively straightforward compared to the world under lockdown. Any firm carrying over the same deficiencies through this year is putting themselves at serious risk.

According to most experts, Commerzbank’s failure to address shortcomings was down to an issue of resources. So this may be one of the tools in avoiding the same fate and where Waymark’s technology comes in. Making sure compliance teams have the resources they need and that they are up to date with the latest requirements, will be crucial to break the cycle, and ensure those important lessons finally hit home.


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