Money Laundering and Financing of Terrorism and organised crime have been and remain significant problems at a global level, thus damaging the integrity, stability and reputation of the financial sector and threatening the global market and the international security of the world. In order to tackle those problems and to complement and reinforce the application of measures to detect and prevent money laundering, Money laundering (AML) programs are employed but the majority of global governments.
AML programs are a collection of procedures used by financial institutions to combat fraud, money laundering, terrorism funding, and other forms of financial crime. They are also known as anti-money laundering (AML) initiatives. Various governments oversee anti-money laundering (AML) programs, which are aimed at financial institutions such as banks, fintech businesses, insurance companies, credit unions, casinos, mortgage companies, and others.
In general, the following are the key reasons why banking regulatory agencies have penalized institutions:
· A lack of a strong compliance culture that is based on sound values, standards, and ethics
· The failure to disclose suspicious activity (SARs),
· Inadequate risk assessment in the areas of KYC, PEP, and CDD
Failures in a bank's anti-money-laundering framework, such as failing to establish governance, failing to develop policies that staff understand, failing to adopt a risk-based strategy, or failing to obtain comprehensive and clear information on clients, beneficiaries, and transactions are all possibilities of the bank sustaining a hefty fine.
Noncompliance with anti-money-laundering regulations can result in significant fines and even prison time. Despite this, insufficient AML compliance results in hefty penalties and a tarnished reputation for firms all over the world each and every year.
We took the time and summarized some of the biggest fines imposed throughout the world in 2021
Some of the Penalized Bank List of 2021
AmBank took part in one of the most notorious scandals; 1MDB scandal in Malaysia. In September 2020, the alleged amount stolen from 1MDB was estimated to be US$4.5 billion and a Malaysian government report listed 1MBD's outstanding debts to be at US$7.8 billion. This huge Malaysian bank, AmBank, has been fined and settled to pay the Malaysian government $700 million. The high penalties are anticipated to damage AmBank's profits.
Our Opinion: Report PEP transactions and suspicious activities to the regional banking intelligence organization.
The Financial Crimes Enforcement Network, or FinCEN, stated in January 2021 that Capital One will be fined $390 million for violating the Bank Secrecy Act's anti-money laundering provisions (BSA).
With relation to its Cash Checking Group business unit, the bank admitted to deliberately failing to adopt and maintain appropriate anti-money laundering measures, as well as neglecting to file thousands of Suspicious Activity Reports (SARs) and Currency Transactions Reports (CTRs).
Millions of dollars in questionable transactions went unreported and were therefore laundered via the bank into the US financial system between (at least) 2008 and 2014. These funds were linked to organized crime, tax evasion, fraud, and other financial crimes, according to FinCEN. Unreported trades totalled over $16 billion.
Our Opinion: SARs are vital tools for AML and need to employed were necessary. The liability is not discharged upon submission of a SAR, but the client must be closely monitored and further actions might become necessary. SAR is not a defensive or get out of jail card, it is a tool to help prevent money laundering
U.S. authorities revealed that Deutsche Bank had agreed to pay more than $130 million to settle claims that the German bank developed a "scheme to conceal illicit payments and kickbacks" to boost its global operations.
Prosecutors allege that Deutsche Bank began a seven-year pattern of fraud in 2009, funneling more than a million dollars in direct bribes and millions more in related costs to so-called "business development consultants" all around the world. Prosecutors claim that the German bank recorded these costs incorrectly.
Our Opinion: It is vital for all corporations not only large banks to have put in place anti-bribery policies enforced. There cannot be a lack of a strong compliance culture otherwise the whole program fails. All employees including higher management need to adhere to certain AML policies in order to prevent illegal activities and money laundering.
11 Banks in UAE
For AML breaches, the UAE central bank penalized 11 institutions a total of $12.5 million. In 2019, it was discovered that the unidentified banks had lax money laundering and terrorism funding safeguards.
Our Opinion: Money laundering activities and schemes are ever changing and become harder and harder to tackle. The AML policy of banks and other corporations needs to be ever changing as well in order to cope with new risks and threats to the system. Employees and key personnel (Compliance Officer) need to be updated constantly and resources need to be funnelled in the right AML frameworks
Apple Savings Bank
Apple Bank for Savings, situated in New York City, received a "order to pay civil monetary penalty" from the Federal Deposit Insurance Corporation (FDIC). This was done in response to allegations of breaches of the federal Bank Secrecy Act (BSA) between 2014 and 2018. Apple Bank violated the BSA's anti-money laundering (AML) rules and failed to comply with a 2015 FDIC consent order–also related to suspected BSA/AML violations–all of which warranted a $12.5 million penalty, according to the FDIC ruling.
Our Opinion: The $12.5 million punishment levied on Apple Bank serves as a reminder to banking institutions that AML compliance must be maintained at all times. Compliance programs must be tailored to the institution, clients, and conditions of both large and small banks. Recommendations from inspections must be adhere to ASAP.
ABN Amro Penalty:
ABN Amro (ABNd.AS), a Dutch bank, announced that it has achieved a 480 million-euro ($574 million) settlement with Dutch prosecutors over money laundering charges.
In a statement, ABN Amro said it has agreed to pay a fine of 300 million euros and disgorgement of 180 million euros, reflecting "the gravity, extent, and length of the observed deficiencies" in fighting money laundering.
The prosecution service said in a statement that its investigation was still underway and that three former board members had been identified as suspects "effectively liable for breach" of the anti-money laundering statute.
Our Opinion: Banks should act as gatekeepers and protect the financial sector and not be made into important actors in criminal activities. Transaction monitoring is an ongoing procedure that needs to be employed catholically to all cases. Failure of employing an ongoing transaction monitoring it usually leads to failure to identify money laundering. Additionally, failure in AML could lead to fines and prosecutions of individuals and not only the corporations.
Bank J. Baer
Julius Baer, a Swiss bank, admits to plotting to bribe FIFA officials with $36 million. For its role in the FIFA money laundering case, the bank was forced to pay $79 million in fines.
Our Opinion: Corruption and money laundering can result in criminal prosecution.
DNB ASA, Norway's largest financial services company, has been fined NOK 400 million ($48.1 million) for failing to comply with the Norwegian Anti-Money Laundering Act. Following an investigation of DNB's anti-money laundering policies and processes, the Financial Supervisory Authority of Norway (Finanstilsynet) levied the penalties. With increased enforcement action, all businesses should evaluate the appropriateness and efficacy of their anti-money laundering policies and processes.
Our Opinion: AML strategy and policies need to be a key ingredient of corporation’s business plan. Without the proper, agile and ever-evolving AML program a company is set for a disaster course as fines and name & shame policies could be catastrophic to the institution.
Money launderers and organized crime is always on the look for new techniques and schemes to evade identifications. AML policies need to be flexible and have the ability to evolve along with the ever-changing tools employed by organized crime. The fines and penalties are becoming so huge that corporations are crumbling when sustaining these hefty amounts. Do not allow your corporation to sustain such a fine, be ahead of the curve and promote the right AML culture and policy your company needs. We at Flexi are here to support your compliance in every step of the way. Please contact us with any questions or requests on this matter.
By fLEXI tEAM