Failing to comply with AML regulations can have serious consequences.
The number of anti-money laundering fines dished out by competent authorities shows no signs of slowing down. From 1st April to 30th June 2021, twenty-five banks were fined a staggering $722,275,805 globally.
Our AML Bank Fines Report Q2 2021 looks at the global picture and summarises each fine with key actionable takeaways for KYC & AML professionals.
Score Priority Corp
Fine amount in USD: $250,000
Actionable Key takeaway: The United States Financial Industry Regulatory Authority (FINRA) imposed a $250,000 fine to Score Priority Corp for failing to develop and implement an effective Anti-Money Laundering (AML) program to comply with the Bank Secrecy Act. The business lacked AML procedures to detect and monitor suspicious activity in the firm’s trading platform and customer accounts. Score Priority did not describe the steps or the frequency of monitoring transactions in foreign accounts, and did not use reports or automated tools to detect red flags. Manual reviews and failing to use surveillance systems to monitor transactions will undoubtedly lead to regulatory action.
Unnamed Exchange house
Fine amount in USD: $136,000
Actionable Key takeaway: An unnamed exchange house was fined $136,000 by the Central Bank of the United Arab Emirates (UAE) for deficiencies in its AML compliance framework. The exchange house had a poor history in compliance and failed to prevent money laundering and terrorism financing. The supervisory authority of the UAE reminded exchange houses of their compliance obligations including the owners and employees of such firms to abide to laws, regulations, and standards both domestic and international. Cash intensive businesses must implement a robust AML framework to protect the integrity and transparency of the financial system.
Nan Shan Life Insurance
Fine amount in USD: $271,914
Actionable Key takeaway: Taiwan’s Financial Supervisory Commission fined Nan Shan Life Insurance for poor AML practices and a lack of internal controls. Salespeople broke the law by paying premiums on behalf of customers to earn reward points and sharing proceeds. Nan Shan’s systems failed to identify and block such payments and the company failed in preventing fraud and money laundering. Monitoring insider threats should be a fundamental component of Fraud and AML surveillance but is often overlooked by firms.
Fine amount in USD: $271,914
Actionable Key takeaway: The Cayman Islands Monetary Authority (CIMA) sanctioned a leading corporate services firm for breaching AML regulations. Intertrust has a protracted history of non-compliance. Failures in Know Your Customer (KYC) and customer due diligence (CDD) included shortcomings in identifying the ultimate beneficial owners (UBOs); collecting documentation; verifying the source of funds; establishing the nature of business; and monitoring clients. Scrutiny on local service providers had increased as the Cayman Islands was added to the Financial Action Task Force’s (FATF) grey list. Failings in AML are often inter-linked. Compliance teams need to ensure they collect documentation and verify UBOs which should be an integral part of your AML program.
Four Pakistani Banks
Fine amount in USD: $614,880
Actionable Key takeaway: Pakistan is another on the FATF grey list for strategic deficiencies in its AML and counter-terrorism financing framework. The country’s regulator – The State Bank of Pakistan (SBP) – dished out $614k in fines on four of the largest banks. The banks were not named but were fined for failing to comply with regulatory obligations relating to banking operations, customer due diligence, AML, and foreign exchange. The central bank advised the four banks to strengthen and improve AML procedures. Pressure by FATF and the international community can be the springboard for regulators to act.
Standard Chartered Trust (Guernsey)
Fine amount in USD: $194,166
Actionable Key takeaway: Standard Chartered Trust (Guernsey) was placed in liquidation in May 2020 but will need to pay a financial penalty of over $194,000 relating to onboarding, customer due diligence, and risk assessment processes and procedures. The Guernsey Financial Services Commission (GFSC) found serious issues relating to the firm’s compliance practices. Most of Standard Chartered Trust’s clients were high-risk entities. Regulated firms must ensure they adopt sound and robust KYC and AML processes and carry out enhanced due diligence of high-risk customers at the point of onboarding and as part of an ongoing monitoring program.
Fine amount in USD: $574 Million
Actionable Key takeaway: ABN Amro agreed to pay $574 million as part of a settlement with Dutch prosecutors due to serious shortcomings in AML. Clients engaged in criminal activities abused bank accounts. The settlement was paid to cover “unlawfully obtained gains” prosecutors said. ABN last year doubled its team dedicated to detecting and investigating suspicious transactions. Hefty regulatory fines can have a negative impact on a bank’s balance sheet. The Dutch bank reported a net loss of $66 million over the first quarter of 2021.
Bank J. Safra Sarasin
Fine amount in USD: $1 Million
Actionable Key takeaway: The Monetary Authority of Singapore (MAS) fined the Singapore branch of Bank J. Safra Sarasin (BJS) – a private Swiss bank – $1 million US dollars due to non-compliance with MAS’ AML and counter-terrorism financing regulations. The violations took place from March 2014 to September 2018 and involved serious breaches in customer onboarding and ongoing monitoring of business relationships. BJS failed to identify and verify source of wealth and funds and understand the rationale behind numerous high value transactions with no economic purpose. Such failures are unlikely to go unpunished by regulators.
Deutsche Bank AG
Fine amount in USD: $1.96 Million
Actionable Key takeaway: The South African Reserve Bank (SARB) imposed an administrative penalty after the supervisory authority found weaknesses in Deutsche Bank’s AML internal controls following an inspection in 2019. The bank failed to comply with provisions outlined in the Financial Intelligence Act including compliance with customer due diligence and enhanced due diligence requirements; record keeping; and governance of AML and counter terrorism financing requirements. Systemic failures in AML can result in multiple fines in different jurisdictions.
Fine amount in USD: $423,000
Actionable Key takeaway: Malta-based Em@ney Plc, an online bank, was fined by Malta’s Financial Intelligence Analysis Unit (FIAU) for a series of AML breaches involving passport sales and cryptocurrencies with links to organised crime. The online bank failed to perform enhanced due diligence for high-risk customers and investigate adverse media alerts that showed criminal connections. Em@ney Plc did not collect any information regarding the nature of transactions in sixteen files held by the bank and did not obtain sufficient information relating to business activity of customers in another four files. Failing to carry out enhanced due diligence and investigating links to organised crime poses a serious risk to banking operations.
Fine amount in USD: $48.1 Million
Actionable Key takeaway: DNB ASA, the largest financial services group in Norway, was reprimanded and ordered to pay a fine of $48.1 million for money laundering lapses. The Norwegian regulator said a routine regulatory inspection revealed serious breaches in AML compliance. The violations had occurred under Norway’s old money laundering act, however the fine imposed related to breaches of current AML legislation only. The bank agreed to make improvements to its AML policies and procedures. A banks AML framework, policy and procedures should be regularly reviewed and improved as part of a continuous improvement program to combat financial crime.
Fine amount in USD: $5.5 Million
Actionable Key takeaway: Nasdaq’s Stockholm’s disciplinary committee ordered Swedbank AB to pay $5.5 million for AML failures and breaching rules on disclosure of information and classifying inside information. The committee said Swedbank breached its rulebook by not classifying information concerning money laundering which was widely known by the bank’s senior management. AML failings are not only of primary concern to the regulator, but the stock exchange can impose penalties for failing to disclose information.
Sapien Capital Limited
Fine amount in USD: $248,000
Actionable Key takeaway: The Financial Conduct Authority (FCA) fined investment firm Sapien Capital Limited $248,000 for failing to stop financial crime and money laundering relating to Cum-Ex trades. Sapien Capital executed more than £6 billion pounds of trades on behalf of hedge-fund manager Sanjay Shah’s Solo Capital group who emerged as a key figure in a $1.6 billion-dollar international tax fraud scheme. More than twenty-five bankers, traders and lawyers have been charged in the U.K, Germany, and Denmark. Always follow the money trail in financial crime investigations.
Citibank Taiwan & DBS Bank Taiwan
Fine amount in USD: $357,194 & $214,302
Actionable Key takeaway: Citibank Taiwan and DBS Bank Taiwan were both on the receiving end of regulatory fines by Taiwans’ Financial Supervisory Commission (FSC) for failing to evaluate money laundering risks and detecting suspicious activity. Citibank Taiwan ignored transaction types specific to Taiwan that potentially are linked to proceeds of crime. Transactions to high-risk jurisdictions and one-person corporate clients sharing the same billing address and contact details were ignored as red flags and marked as low or medium risk customers. Moreover, the transaction monitoring system excluded large value transactions which went against the spirit of AML principles. Risk appetite, systems, controls, and processes should be adapted to country-specific requirements and regulations.
Bank Julius Baer
Fine amount in USD: $79 Million
Actionable Key takeaway: Julius Baer, a Swiss bank, admitted conspiring to launder over $36 million in bribes through the USA to FIFA officials. The bank entered into a deferred prosecution agreement and was ordered to pay $79 million in penalties for its role in the FIFA money laundering scandal. Corruption and money laundering can land you in serious hot water with the authorities resulting in criminal enforcement.
Punjab National Bank and Bank of India
Fine amount in USD: $267,615
Actionable Key takeaway: Punjab National Bank and Bank of India (BOI) were on the receiving end of fines imposed by the Reserve Bank of India (RBI) because they did not comply with certain requirements set by the authorities. Breaches included stipulated transaction limits, delayed reporting of fraud, sale of a fraudulent asset, and not meeting KYC norms and AML standards. Failing to report to supervisory authorities may result in administrative sanctions and penalties for a range of breaches.
Fine amount in USD: $6.9 Million
Actionable Key takeaway: Latvia’s watchdog imposed a fine of $6.9 million to Rietumu Banka for AML and counter-terrorism violations. The Financial and Capital Market Commission (FCMC) carried out an investigation in 2019 to assess the bank’s internal controls and systems to see if the bank could identify and mitigate risks domestically. Irregularities and deficiencies were identified, and the bank was found to inadequately assess risks of payment service providers. A lack of resources were allocated by the bank to address issues. Risk assessments and risk scoring were found to be defective, and transaction monitoring alerts affected customers. Shortcomings in AML clearly can have a negative impact on the customer experience.
The Baramati Sahakari Bank, Mogaveera Co-operative Bank & Indapur Urban Co-operative Bank
Fine amount in USD: $299,000
Actionable Key takeaway: Three Indian banks were hit with monetary penalties by the Reserve Bank of India (RBI). Mogaveera Co-operative Bank and Indapur Urban Co-operative bank, respectively, were fined for breaching KYC norms. The Baramati Sahakari Bank was also fined for contravention of norms and statutory restrictions. Adhering and complying with KYC norms should be the first line of defence.