Fenergo released its half-year annual findings on global financial institution enforcement actions, revealing a sharp 88% decline in monetary penalties collected in H1 2023 compared to H1 2022. US financial institutions continued to lead in fines, paying out 83% of the total penalty dollars totaling $157.2 million despite comprising only 10% of the world’s regulatory violations.
Global financial regulators levied 97 fines in the first half of 2023, totaling $189.1 million for non-compliance with Anti-Money Laundering (AML) regulations, including Know Your Customer (KYC), and client due diligence (CDD), as well as sanctions violations. In the same period last year, regulators collected $1.6 billion in fines from violations across Europe, Middle East and Africa (EMEA), North America and Asia Pacific. The second half of calendar years has historically seen an uptick in enforcement actions, but the findings confirm a multi-year trend of decreasing fines, which peaked in 2020 at over $10 billion.
US authorities and institutions
The report shows that global actions and monetary penalties are on the decline for the financial sector, and US FIs saw their share of fines decrease in value by 45% since last year during the same period. The US charted a 44% decrease in total penalties in 2022 over 2021.
Moreover, in 2023, US regulatory agencies have demonstrated a willingness to investigate the world’s most prominent financial institutions, including large individual settlements with Coinbase, Wells Fargo, and BlockFi. The US Federal Reserve and the Department of the Treasury’s Office of Foreign Assets Control (OFAC) hit Wells Fargo with the largest collective fine in the first half of 2023, at $97.8 million.
Rory Doyle, head of Financial Crime Policy at Fenergo, said in a statement: “In both periods, we saw several large individual fines that constituted the bulk of the global fines total. Even when removing these individual large fines, there is a decreasing trend in global fines issued in the first half of the year for financial crime regulatory violations. But banks should not assume that regulators are taking their feet off the accelerator. Especially in the US, regulators are demonstrating a focus on scrutinizing larger institutions for serious violations, instead of levying enforcement actions on many organizations, no matter the violation.”
Front page SEC enforcements against the likes of Coinbase roiled the cryptocurrency markets earlier this year, and fines issued against digital asset institutions constitute 33% of total global fine volumes.
“Regulators across the globe are still trying to finalize regulatory schemes for the cryptocurrency industry, as debates continue about how the space should be regulated,” Doyle said in a statement. “This year regulators and policymakers have made it abundantly clear that crypto’s advancement into mainstream financial systems warrants the implementation of guardrails to end to the regulatory uncertainty. I expect the US Treasury could announce additional AML regulations this year to account for gaps in current frameworks.”
Following the pattern of recent years, regulators are showing signs of turning up the heat in the second half of 2023. Already since July, there has been at least $2.65 billion in enforcement and settlement actions levied by regulators in the China, Cyprus, the US, UK, Dubai and Belgium, including a $186 million settlement with Deutsche Bank for AML regulatory violations to US regulators. This trend for harsh penalties in the second half of the year is becoming a common theme as FIs scramble to settle balance sheets ahead of end-of-year reporting.”