encompass corporation, a fast-growing provider of intelligently automated Know Your Customer (KYC) solutions, recently carried out an analysis of Anti-Money Laundering (AML) related penalties that have been handed down between 2002 and April 2019, with a particular focus on 2018 and 2019. The research comes as numerous global banks have received multi-million dollar fines in the past year.
Key highlights from the research are as follows:
- 2019 looks set to be year of record AML fines, overtaking 2014 ($10.89bn)
- $7.7bn of AML fines handed out in January to April 2019, vs $1.16bn in same period in 2018
- US-based regulators penalise institutions the most, followed by the UK
- Average fine over past 17 years is $155m, while the median fine is $2.8m
- Banks still receive majority of penalties, but there is a growing focus on other sectors
The findings show that in January to April of 2019 alone, the combined value of penalties given out was over 70% of the total awarded in the whole of 2014 – the year which currently holds the record for highest total value of fines. It is nearly double the value of AML fines from the entire of 2018 ($4.27bn), despite the number of penalties being roughly a third (9 in January-April 2019 vs 29 in 2018).
Wayne Johnson, Co-Founder and CEO of encompass corporation, commented: “Ever since the financial crash in 2008, there has been an ever-growing focus on the identification and prevention of money laundering and other financial crimes at financial institutions. Since 2014, total AML penalties have remained above a billion dollars every year, perhaps reflecting the increased regulatory focus on this area since the Panama Papers were leaked in 2015. Multi-million dollar fines are becoming the ‘norm’, and 2019 looks set to be the biggest year yet in terms of the value of fines handed out by regulators.
Given their significance in the global financial markets, it isn’t surprising that the focus for fines remains predominantly on banks, although we are increasingly seeing the spotlight land on companies in other industries, such as legal, gaming and cryptocurrency. This shows that there is a growing recognition that these sectors are also prime channels for money-laundering, and we expect to see this shift to non-financial services businesses continue in the coming months and years.
Although not currently the case in 2019, overall, US-based regulators have been the most active over the period in which our research was carried out. Again, this is not a surprise as the US financial market is the biggest in the world and it also has a transparent regulatory culture, which not all jurisdictions do. This transparency is shared by the UK, which is the second most active jurisdiction when it comes to AML penalties. The current US administration has also been increasingly focused on sanctions, suggesting greater future enforcement actions by US regulators.
We will continue to monitor this data and re-analyse it in three months’ time: it will be very interesting to see if any further regional or sector insights come to light.”