High-profile scandals and compliance failures in the US, Israel, Northern Europe and Germany have attracted the lion’s share of penalties for non-compliance with anti-money laundering, know-your-customer and sanctions regulations in the first half of the year.
An analysis by compliance software provider Fenergo counted US$5.6 billion in penalties for global financial institutions over the first six months of 2020.
Fines in Asia saw a dramatic increase from $3.5 million to almost $4 billion, as Goldman Sachs reached a $3.9 billion settlement with Malaysia for its role in the 1Malaysia Development Berhad scandal. The bank was fined $2.5 billion and guaranteed the return of $1.4 billion in assets from the theft of billions of dollars from a Malaysian government fund.
In a press release, Rachel Woolley, global director of financial crime at Fenergo, said while overall issued fines were 30% lower than during the same period last year, it is likely that the total enforcement actions issued in 2020 will be on par with, if not surpass, the 2019 total of almost $8.4 billion.
“We can also expect to see additional penalties issued in response to the 1MDB scandal as the U.S. Department of Justice (DoJ) investigation remains open,” she said.
Although regulatory and supervisory activity may have been impacted by COVID-19, global regulators have reinforced the importance of vigilance and reporting of suspicious activity to ensure the detection and prevention of financial crime throughout the pandemic, Woolley noted.
She said, “As financial institutions continue to face operational challenges in the months ahead, they may struggle to stay on top of other fraudulent activity brought on by COVID-related initiatives, such as the US Paycheck Protection Program (PPP) loan programme, which may result in enforcement actions later in the year and into 2021.”
In Sweden, three banks were fined $536 million collectively for lacking sufficient AML governance and controls in the Baltic states.
US authorities, including the DoJ, the Federal Reserve and the New York State Department of Financial Services (NYDFS), levied fines of over $900 million against an Israeli bank for tax evasion and money laundering after discovering the bank had concealed more than $7.6 billion in Swiss and Israeli bank accounts. The Israeli bank was also fined by the DoJ for its role in a money-laundering conspiracy surrounding the Fédération Internationale de Football Association (FIFA).
In addition, the NYDFS issued a fine of $150 million to Deutsche Bank for a lack of oversight in its dealings with the late financier and accused child sex trafficker Jeffrey Epstein.
Following criticism by the Financial Action Taskforce and concerns highlighted in mutual evaluation reports, fines increased substantially in Pakistan, up 845% year on year, Hong Kong (+223%) and Taiwan (+116%).
While Pakistan was singled out by the FATF for having strategic deficiencies in its AML/CTF regime, a September 2019 FATF report found that Hong Kong must enhance the prosecution of money laundering involving crimes committed abroad and strengthen its supervision of certain non-financial businesses.
The Cayman Islands is currently undergoing a re-rating process with the FATF. The results are expected in the first quarter of 2021.
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