Financial institutions are under the lens of regulators, and that scrutiny looks like it will only continue to grow. In fact, financial institutions that lack compliance and due diligence were already fined a staggering $2.7 billion in 2021, according to our "AML Fines 2021 Report."
Who are the biggest offenders, and why are regulators coming down so hard on them? But more importantly, what can we learn from their mistakes? I've compiled the seven largest bank fines that have occurred so far in 2021, with actionable takeaways for KYC and AML compliance professionals.
Fine: $130 million
Deutsche Bank entered into a three-year deferred prosecution agreement with the U.S. Attorney's Office and was fined $130 million for violations of the Foreign Corrupt Practices Act (FCPA), as well as for their involvement in a commodities fraud scheme. The scheme to conceal bribes and manipulate commodities trading involving publicly traded precious metals included senior executives who knowingly and willingly conspired in falsifying payments to balance the books. Negligence, market manipulation and conspiracy inevitably lead to criminal proceedings and prosecution.
Firms must check counter-fraud, anti bribery and corruption controls, as well as monitor both internal and external risks.
Fine: $79 million
The U.S. Attorney's Office fined Swiss bank Julius Baer for facilitating bribes and turning a blind eye to compliance, as the bank laundered over $36 million in bribes to FIFA officials through the U.S. The bank was reprimanded, ordered to pay $79 million and entered into a deferred prosecution agreement.
As we saw before, with the 1MDB scandal, compliance teams and relationship managers should review high-value transactions from PEPs and other high-risk customers to ensure adherence to AML regulations.
Fine: $48.1 million
Norway's financial regulator Finanstilsynet fined the country's largest lender DNB ASA over $48 million for inadequate compliance with AML regulations after an ordinary inspection in 2020 by the financial supervisory authority revealed a lack of compliance pursuant to the previous AML regime. DNB had previously come under scrutiny for allegations of transferring millions to shell companies on behalf of one of Iceland's fishing companies, Samherji.
Financial institutions should always verify if a company is real before engaging with them and implement robust controls for high-risk industries.
Apple Bank For Savings
Fine: $12.5 million
The Federal Deposit Insurance Corporation (FDIC) issued a civil penalty to Apple Bank for Savings for violations of the Bank Secrecy Act (BSA), costing them $12.5 million. Apple Bank also failed to comply with an FDIC consent order relating to BSA/AML breaches.
Banks must ensure their compliance program is fit for purpose and incorporates a risk assessment for customers, products, channels and jurisdictions.
Fine: $216 million
Global AML Manager, Fenergo, said: "The scale of financial crime continues to grow while the methods used by criminals to launder the proceeds of crime evolve. Our 2019 fines analysis shows that many of the financial institutions penalised lacked appropriate systems and compliance infrastructures that are necessary to identify and address areas of high risk. Effective regulation technology is no longer a 'nice to have', it's essential for the future of banking and the reduction in global financial crime."
The data also highlights a trend for US regulators to impose tougher penalties on foreign financial institutions compared with domestic institutions. Since September 2018 a total of 19 fines were handed to banks with headquarters in France, Israel, Italy, Switzerland, UAE and the UK, at a total value of $4.1bn compared to just $246 million in fines issued to US institutions. Average fine values to EMEA headquartered banks were 10 times higher (USD $216m) in the same period than those imposed to US institutions (USD $20m).
Stay Compliant Or Pay The Cost
The reasons for AML fines in 2021 have ranged from ignoring internal illegal activity to serious shortcomings in AML compliance. Globally, regulators and financial institutions are coming under increased pressure to stop illegal flows, so organisations need to prepare for increased scrutiny of their activities. Therefore, compliance teams need to adopt every relevant technology that they can to prepare themselves and prevent their organisation from being used by criminals to launder dirty money—or else they'll pay the price for it.