Fenergo’s study reveals increase in AML, KYC and sanctions fines for global financial institutions

By Megha Bhattacharya

Client lifecycle management solutions provider, Fenergo has released its mid-year findings on global financial institution fines. The study has revealed that by the end of July 2020, penalties worth $5.6 billion have been collected for non-compliance with AML, KYC, and sanctions regulations. Fenergo stated that the financial institutions in the US, Sweden, Germany, and Israel were the hardest hit with fines issued by APAC regulators increasing to almost $4 billion.

Rachel Woolley, Global Director of Financial Crime at Fenergo, said, “While we are seeing a 30% reduction in the value of fines issued to date compared to the same analysis period last year, it is likely that the total enforcement actions issued in 2020 will be on par with, if not surpass, the 2019 total of almost $8.4 billion.”

Regulators in Malaysia issued two of the highest value enforcement actions in 2020 thus far. The regulator reached a settlement with a major US-headquartered global bank that included a $2.5 billion penalty and a guaranteed return of $1.4 billion in assets. The bank was fined for its role in the theft of billions of dollars from a Malaysian government fund, also known as the 1Malaysia Development Berhad scandal (1MDB scandal).

“We can also expect to see additional penalties issued in response to the 1MDB scandal as the U.S. Department of Justice (DoJ) investigation remains open. Although regulatory and supervisory activity may have been impacted by COVID-19, global regulators have reinforced the importance of vigilance and reporting of suspicious activity to ensure the detection and prevention of financial crime throughout the pandemic,” Woolley added.

Similarly, three Swedish banks were fined $536 million collectively for lacking sufficient AML governance and controls in the Baltic states. An Israeli bank was penalised for tax evasion and money laundering and was also fined by the DoJ for its role in a money-laundering conspiracy surrounding the Fédération Internationale de Football Association (FIFA). Adding to this, a German bank was fined $150 million by the NYDFS for its links to the late financier, Jeffrey Epstein.

APAC countries, too, have seen an increase in fines with Pakistan witnessing a rise of 845% as compared to 2019 mid-year, Hong Kong with a 223% increase and Taiwan with a 116% increase.

Marc Murphy, CEO, Fenergo, said, “…Regulators and government agencies globally are actively encouraging financial institutions to leverage technology that automates and streamlines KYC and AML compliance processes while improving customer experience. A solid digital-first strategy will better equip financial institutions to detect and prevent financial crime and deliver enhanced digital customer experiences.”