Penalties that financial institutions incurred for non-compliance with anti-money laundering and data privacy regulations have dropped significantly in 2021. However, there is still much work to be done to stem financial crime.
Happy New Year to all our readers and best wishes for 2022. To counter the feeling of déjà vu brought on by the Omicron variant, I thought I would start the year on a positive note with the news that the value of anti-money laundering (AML) and data privacy fines globally reduced by almost half in 2021 versus 2020.
According to regtech firm Fenergo, penalties incurred by financial institutions totalled $5.37bn in the past year, compared to $10.6bn in 2020. In addition, the total number of fines levied to financial institutions for compliance breaches was approximately 176 compared to 760 in the same period the year prior.
Of the almost $5.4bn in fines, non-compliance with AML regulations totalled $5.35bn. Data privacy fine values totalled $17.4m, of which $11.5m were for General Data Protection Regulation breaches in Europe.
The caveat, however, is that 2020 was an exceptional year of enforcement actions, with many stemming from the investigations into the 1Malaysia Development Berhad (1MDB) scandal. 1MDB’s impact was still felt in 2021, as AmBank Group agreed to pay a $698.3m settlement in February to the Ministry of Finance Malaysia for its role in the violations.
According to Fenergo’s research, the Europe, the Middle East and Africa region saw the biggest increase in the value of financial penalties from just over $1bn in 2020 to $3.4bn in 2021. This was driven mainly by France, which topped the country list in terms of value, and the $2bn fine issued to UBS for historic tax fraud by a French appeals court – which overturned the $5.1bn penalty issued in 2019.
In the US, which recorded the second highest value of fines, regulators issued $673.2m in enforcement actions to foreign banks out of a total of $1.2bn. Malaysia, the UK and the Netherlands round out the top five countries in terms of total fines.
The past year also saw the rise of regulators targeting non-banking financial firms, such as digital asset service providers. For example, US Financial Crimes Enforcement Network and the Commodity Futures Trading Commission fined crypto-trading platform BitMEX $100m for AML violations.
Clearly, there remains a lot of work to be done in addressing financial crime, particularly money laundering. In The Banker’s January issue, Anita Hawser takes a deep dive into the state of play of AML compliance in Europe and asks: with six EU AML directives and counting, where has Europe’s seemingly watertight approach to fighting financial crime and money laundering gone wrong? Can the establishment of a proposed pan-EU AML authority succeed where other supervisory institutions have failed?
Joy Macknight is editor of The Banker. Follow her on Twitter @joymacknight
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