AML fines surge as watchdogs impose tougher penalties in H1 2021

AML Enforcement is Particularly Active in the EU and the U.K.

Global regulators are actively enforcing AML rules, particularly in the EU and the U.K., thus continuing to send the message that enforcement remains a top priority.  The fines mainly relate to shortcomings in AML management, inadequate suspicious activity monitoring and customer due diligence (“KYC”). The main recent enforcement actions include:

• The UK’s Financial Conduct Authority first attempted prosecution for AML failings against NatWest, which failed to properly monitor the actions of a Bradford-based gold dealer. 

• Monzo, the start-up digital lender, revealed last month it was being investigated by the FCA over potential breaches of AML laws. 

• German rival N26 has twice been rebuked by domestic regulator BaFin for failures in its AML controls and this year had a special supervisor installed to oversee its remediation.

• Dutch lender ABN Amro, which reached a €480m settlement with prosecutors after being accused of violating AML laws “for a number of years and on a structural basis”.  

• Also, new UBS chief executive Ralph Hamers could face a court probe into his role in a €775m money-laundering scandal from 2018 when he led ING. 

• In the US, Capital One had to pay a $390m penalty for “wilful and negligent” AML violations under the Bank Secrecy Act after an investigation by the Treasury Department.

Regulated Entities Need to Rethink Their Compliance Program

Just like the financial services industry is in the middle of a great digital transformation journey, and like technology gets more advanced, so do criminal tactics, such as regulated entities do need to rethink their compliance program and rely on technology-advanced tools, both from a KYC and transaction monitoring perspective.

Amongst the key enforcement trend setters, are the rapidly growing FinTechs, whose compliance and KYC processes are often not able to keep up with the pace of customer acquisition, thus making it essential for such entities to be equipped with robust tools that help them scale customer onboarding and KYC monitoring throughout the relationship.

Also, transaction monitoring cannot cope in its current state and need to rely on emerging technologies like artificial intelligence to help combat AML in the sense that AI can alleviate admin-heavy processes while enhancing fraud detection.

What’s next ? At Ondorse, we believe that the current compliance shortcomings will prompt new laws, such as the proposed AML Regulation package issued by the European Commission in July 2021, which will in turn feed larger fines and criminal enforcement in the near future.  Also, the focus of regulators and enforcement agencies may also expand to other business areas, such as football transfers (including agents and intermediaries) and the art world.