Being issued with a hefty fine for regulation breaches is not something banks are looking for. But with dubious behaviour still making the headlines, are big cash penalties enough of a disincentive?
Asia’s banks have this year seen a record amount of fines imposed by regulators for breaches of know your customer, anti-money laundering and countering terrorist financing rules. Running up fines of billions of dollars is not the best business practice, especially in the middle of a global economic slump predicated by a once in a generation pandemic.
The fines haven’t been given out for trivial reasons. The 1MDB case in Malaysia hit headlines worldwide for corruption that went to the very top of the government. Meanwhile, Australia dealt with a case which shocked the public due to possible links to child abuse. No one doubts that in cases this serious some form of penalty is justified. Wary of the watchful eye of the Financial Action Task Force, regulators have been in some cases been preemptively checking in on their banks to ensure they don’t find themselves in such an embarrassing and damaging situation.
But the big question is, how much of an impact these fines are having? While the sums involved seem incomprehensible to those outside of banking, those in the sector know the numbers account for little more than a few days’ worth of profits for some banking organisations. When weighed up against the business they may have won and the profits already gleaned off the back of their illicit activity, it’s questionable if they even end up making a loss.
In order to curb these types of fines, questions are being asked around whether the punishment needs to go down to a personal level. If overseeing the payment of a massive fine isn’t enough to encourage impeccable behaviour, perhaps the threat of legal proceedings or being struck off from working in the financial sector again could act as an incentive to ensure due diligence procedures are up to scratch.
