A new report finds that regulatory enforcement actions against financial institutions and their employees totaled $5.4 billion for non-compliance with anti-money laundering (AML) and data privacy regulations last year, in comparison to $10.6 billion in 2020, a decline of just under 50 percent.
The report, issued by Fenergo, which provides compliance technology systems to financial services firms, said the decline was mainly related to a surge in large enforcement actions against financial firms in 2020, and that 2021 marked more of a return to normalcy in compliance enforcement actions against banks.
Notable enforcement actions in 2021 included a $2.03 billion penalty issued to a major Swiss bank by the French Court for historic tax fraud. In the United States, regulators issued $673.2 million in enforcement actions to foreign banks, including a $100,000,000 fine to the UAE’s oldest private bank, Mashreqbank PSC, for illegally processing more than $4 billion of payments linked to Sudan.
The total number of enforcement actions with financial penalties levied to financial institutions for compliance breaches in 2021 was approximately 176 compared to 760 in the same period in 2020. The average fine value for AML-related compliance breaches issued to financial institutions in 2021 was $34.4 million. The EMEA region saw the single biggest regional increase in the value of financial penalties from just over $1 billion in 2020 to $3.4 billion in 2021.
Banking Blunders
The global research comes just weeks after two major U.K.-based banks, HSBC and NatWest were fined $85 million and $350.3 million, respectively, for AML failures. NatWest was fined for serious weaknesses in its anti-money laundering controls over an eight-year period, which included ineffective transaction monitoring systems.
The year 2020 that saw the culmination of several regulatory investigations into the 1Malaysia Development Berhad (1MDB) scandal. The fallout from the scandal continued to influence enforcement activity in Malaysia in 2021 with AmBank Group agreeing to pay a $698.3 million settlement to the Ministry of Finance for its role in the violations.
“The decrease in fines in 2021 is largely attributed to a reduction in the number of multi-billion-dollar fines compared to previous years. The pandemic has also impacted regulatory investigations; regulators weren’t able to initiate as many on-premise investigations in the last two years which has likely had a knock-on effect on enforcement actions,” said Rachel Woolley, global director of financial crime at Fenergo in a statement on the report. “Trends identified in our research, as well as recent financial crime scandals, suggest that financial institutions aren’t adequately equipped to manage the financial crime risks to which they are exposed. Without effective systems and controls that allow firms to not only know their customer and the associated risks, but also understand their behavior throughout their lifecycle – the door will be left open for criminals.”
2021 also saw the rise of non-banking financial firms being targeted by regulators, such as virtual asset service providers. Crypto-trading platform, BitMEX and crypto payments provider Bitpay, for example, were fined a combined amount of $100 million for failing to comply with money laundering obligations.
Individuals Face Fines Too
Financial institution employees continued to face regulatory scrutiny in 2021 as well, with 16 individuals fined $16.5 million for their roles in AML-related compliance breaches. In Bahrain, the High Criminal Court went as far as sentencing six Future Bank employees to prison with a fine of $2.7 million each for their role in Bahrain’s largest money laundering case in the history of the state.
Data privacy fine values were down by 82 percent at $17.4 million, the majority ($11.5 million) of which were for GDPR breaches in Europe. 
Joseph McCafferty is editor & publisher of Compliance Chief 360°.
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