There is a direct correlation between the severity of money laundering violations and the size of fines in the 10 years since 2003, according to BankersAccuity.
The payment efficiency and compliance solutions provider, which is owned by Reed Elsevier, released research entitled ‘Trends in anti-money laundering (AML) compliance’, reviewing the movement of fines for illicit financial activity and money laundering over the past 10 years.
While the number of fines has decreased, the penalty amount has continued to increase. In 2003 there were 153 fines with only US$2.7m worth of penalties, while in 2012 there were just 16 fines that totalled US$1.1bn in penalties.
“Last year saw a tremendous increase in fines and penalties with several leading global banks hit with extremely large fines for AML and Office of Foreign Assets Control (OFAC) violations,” said Henry Balani, managing director at BankersAccuity. “The size of fines is typically based on several factors – level of egregiousness, willingness to self-report and on-going remediation efforts. While the total number of fines has decreased, this trend is only temporary.”
As demonstrated during the first half of 2013, the number of fines in the five months from January to May has almost doubled compared to the same period in 2012
“Regulators have focused on high profile banks in recent years. The intent is to send a clear message to the market that violation of sanctions needs to be taken seriously by all banks and financial institutions,” added Balani. “Now that the message has been sent, regulators in the upcoming years will again take a wider sweep and focus on institutions of all sizes.”
BankersAccuity adds that in general, fines are levied for a range of reasons from internal ‘payment stripping’ to knowingly making payments to sanctioned countries. With high-profile enforcement of AML regulations globally, organisations are faced with increased risk and greater challenges to achieving and maintaining compliance. Key events and developing trends over the last decade offer insight and important lessons for firms seeking to avoid participation in illicit financial transactions.
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