APAC region saw single biggest regional increase from $6.6 million in 2019 to $5.1 billion in 2020
London, Dublin, New York, Singapore (December 9, 2020) – Fenergo, the leading provider of digital transformation, customer journey and client lifecycle management (CLM) solutions, today released its annual findings on global financial institution fines which show that for the year to date, penalties have totaled $10.4 billion for noncompliance with anti-money laundering (AML), know your customer (KYC), data privacy and MiFID (Markets in Financial Instruments Directive) regulations. The total volume of fines levied to financial institutions for these breaches was 198, a year-on-year increase of 141 percent. The average value of enforcement actions against financial institutions for AML-related compliance breaches is 44 percent lower than in 2019.
Notable findings of the annual report:
- Landmark action against Goldman Sachs totaling $6.8 billion (from multiple regulators) for its involvement in 1MBD scandal – including the second biggest enforcement action imposed against one bank since 2015
- Major Australian bank fined almost $1 billion for its money-laundering scandal with links to serious crimes
- In 2019 nine fines amounting to $2.4 billion were issued by U.S. regulators to foreign banks (U.K. and Italy) for sanctions violations. This year there was just one significant sanctions fine by the Office of Financial Sanctions Implementation (OFSI) to a U.K. bank for breaking Russian sanctions violations. It was the largest ever fine imposed by the regulator at $25.4 million
- 203 individuals were fined $88.8 million for AML and MIFID breaches in U.S., Europe and China
- Global data privacy fines amounted to $88.6 million
“2015 was a record year for enforcement actions, but 2020 has the potential to match or top that year’s total if significant investigations are concluded by the end of the calendar year. There have been two notable shifts: APAC has overtaken the U.S. in terms of the value of enforcement actions for the first time since 2015 – driven by recent FATF activity and the repercussions of the 1MDB scandal, and there has been an increased focus on individuals being penalized than we have seen in previous years. In addition to imposing penalties on financial institutions, regulators and authorities in China, the U.K. and the U.S. have held individuals accountable for compliance failings. While banks may hold reserves explicitly to settle enforcement actions, individuals will suffer a far greater personal impact. This, along with greater whistleblowing protection and incentives, will make a difference in tackling the industry-wide issue of financial crime,” said Rachel Woolley, Global Director of Financial Crime at Fenergo.
Regulators in APAC, including the Malaysia Securities Commission and AUSTRAC in Australia, were among those handing out the biggest enforcement actions to banks involved in the 1MBD scandal and the Australian bank embroiled in a high-profile money laundering scandal. However, the U.S. Department of Justice was also more punitive this year, issuing enforcement actions totaling $1,924,071,850 to Goldman Sachs, Bank Hapoalim and Union Bancaire Privée.
Collectively, financial institutions headquartered in the U.S. received the highest value of fines, accounting for $7,489,785,116. The fines levied toward Goldman Sachs accounted for 91 percent of the U.S. total.
“It is estimated that fewer than 1% of criminal funds laundered through the financial system gets confiscated by authorities. The recent FinCEN files has proven that the industry must work better together to address this growing problem. We must establish a common best practice and replace onerous manual Know Your Customer (KYC) and Anti Money Laundering (AML) risk assessment and compliance processes with technology and tools that enable financial institutions, authorities and non-financial firms to better detect and prevent financial crime,” said Marc Murphy, CEO, Fenergo.
Countries that issued the most fines by value:
- U.S. $4,348,701,664
- Malaysia $3,900,000,000
- Australia $921,587,910
- Sweden $550,169,770
- U.K. $199,306,927
There was also a significant rise in the number of data privacy fines this year while the administrative sanctions handed out for MiFID violations are lower in volume and value compared to 2019. In 2020, a total of 36 fines were issued to financial institutions and individuals at the value of $7 million, compared to 2019, when two fines alone amounted to $81.5 million. On the data privacy side, while GDPR fines are comparable to 2019 at $1.7 million, the number of data privacy fines issued in the APAC region increased significantly, with a large $529,027 fine issued in India and seven fines issued in China totaling $6,338,969. The most significant fine levied for data privacy was to Capital One for $80,000,000 by U.S. regulator, Office of the Comptroller of the Currency (OCC), for its 2019 cloud data breach.
Click here to watch Fenergo’s recent webinar on the FinCEN files scandal.
Fenergo is the leading provider of digital transformation, customer journey and client lifecycle management (CLM) solutions for financial institutions. Its software digitally transforms and streamlines end-to-end CLM processes – from regulatory onboarding, data integration, client and counterparty data management, client lifecycle reviews and remediation, all the way to client off-boarding. Fenergo is recognized for its in-depth financial services and regulatory expertise (from a team of over 30 global regulatory specialists), community-based approach to product development. The CLM solutions and out-of-the-box rules engine ensures financial institutions are future-proofed against evolving know your customer (KYC), anti-money laundering (AML), tax and OTC derivatives-based regulations across 100 jurisdictions. Fenergo recently expanded into new markets including asset and wealth management, private, retail, business and commercial banking and has over 80 global clients.