Kroll data show that while anti-money laundering (AML) continues to dominate global financial crime regulation, enforcement activity is slowing as attention turns from banks to other financial institutions. Kroll is a provider of data, technology and insights related to risk, governance and growth.
The findings come from Kroll’s annual Global Enforcement Review 2022, which shows that, globally, the value of fines issued to financial services firms for AML failings reached a new recent low of $1.6 billion in 2021, compared to $2.2 billion in 2020 and representing just half of the peak figure of $3.3 billion achieved in 2018.
Meanwhile, in an emerging trend, 2021 saw US regulators impose further fines for AML-related infringements on cryptocurrency businesses — with one notable case seeing a cryptocurrency exchange [BitMEX], being fined $100 million by the Commodity Futures Trading Commission (CFTC) and US Financial Crimes Enforcement Network, FinCEN.
Malin Nilsson, managing director for Financial Services Compliance and Regulation at Kroll, said in a statement: “In the Western world, it is almost impossible to find a major, global bank that has not been sanctioned for AML or other financial crime failings in recent years…Now that AML-related concerns and failings have resulted in many large banks being sanctioned, regulators are beginning to pay increased attention to other areas of financial services.”
Kroll’s report also highlights the four key AML failings from 2016-2021 which regulators across the world have consistently identified through the fines they imposed:
- AML management (142 cases)
- Suspicious activity monitoring (101 cases)
- Customer due diligence (98 significant cases)
- Compliance monitoring and oversight (60 cases)
Jurisdictions
The report further shows that the overwhelming historical dominance of the U.S. in terms of the value of AML-related fines now seems to be a thing of the past, with U.S. fines accounting for just 36% of the global total in 2021.
In a further shift of trends, 2021 also saw a new jurisdiction join the “top table” of countries imposing major fines for AML failings — the Netherlands. Indeed, in 2021, the Dutch regulator fined one of its major banks $578 million, which alone represented 35% of the total value of AML fines globally.
Meanwhile, 2021 was another busy year for the UK, with the Financial Conduct Authority (FCA) issuing four AML fines totaling $441 million. These fines represented over half (58%) the total value of all penalties imposed by the FCA in 2021, compared with just 20% in 2020 and 26% in 2019. In fact, 2021 saw AML fines as the highest proportion of total fines by the FCA since 2017.
New investigations by FCA slow
Kroll’s report shows that the FCA had 54 open active financial crime investigations as of 31 March 2021. Of these, eight were originally opened in 2016 and 14 in 2017, according to information provided in response to a Freedom of Information Act request submitted by Kroll. However, new AML enforcement investigations in the UK have, slowed to a trickle — with only three opened by the FCA in 2021 down from 13 AML cases in 2016 and 24 cases in 2017.
Simm said in a statement: “The FCA will be looking either to achieve a public outcome from its existing cases or to close them in order to be able to deploy resource on new investigations, potentially in sectors other than banking. Given the huge growth of lightly-regulated cryptocurrency businesses in recent years, the increased level of scrutiny being given to these institutions is one trend we can safely predict will continue to gain momentum.”