Hong Kong (September 27, 2017) – Regulators in the United States and Europe have imposed $342 billion in fines on banks since 2009 for misconduct, including for violation of anti-money laundering rules, and that figure is likely to top $400 billion by 2020, a research report said on Wednesday.
Pending cases involving missteps in the U.S. mortgage market in the run-up to the 2008 financial crisis and a fresh penalty on mostly regional banks for anti-money laundering breaches would result in a surge in fines over the next few years, Quinlan and Associates said.
The Hong Kong-based financial services consultancy estimated bad behavior had erased $850 billion in profits for the top 50 global banks since the 2008 financial crisis in the form of write-downs, trading losses, fines and higher compliance costs.
The bulk of the new regulatory fines would be against regional banks, including some Chinese banks, that have lagged behind their global peers in bolstering investments on compliance to combat money laundering, CEO Benjamin Quinlan said.
Among regional banks, Commonwealth Bank of Australia (CBA.AX) is battling allegations of systemic breaches of money-laundering and terror-financing laws that could expose it to billions of dollars in fines.
Spain is investigating the European management of the Industrial and Commercial Bank of China (601398.SS) as part of a widening probe into alleged laundering through the Chinese banking giant’s Madrid branch.
“Notwithstanding the massive scale of fines that have been handed out to the banking industry to date, we believe the bloodbath is far from over,” the report said, adding that banks have failed to drive cultural change to deal with misconduct.
Know-your-customer (KYC) and anti-money laundering (AML) processes became a key focus globally after some large global banks were hit with hefty fines in 2012, triggering a flurry of initiatives across the banking sector to boost compliance.
Major international banks are now spending between $900 million and $1.3 billion a year on financial crime compliance, according to analysis by corporate governance recruitment firm Barclay Simpson.
“Despite the potential scale-back of some recent regulatory reforms in the U.S., we anticipate that AML, in particular, will remain a key enforcement priority, given ongoing concerns over terrorism across the globe.”
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