2022 AML regulatory fines
The anti-money laundering (AML) penalties saw an increase of 50% in 2022 reaching $5 billion. Financial institutions and Legal entities that are regulated suffered from the biggest fines of all time. The fines are higher than previous years with the regulatory landscape getting more demanding and stringent each year since the 2008 crisis, the efficacy of the global crackdown on financial crime is being questioned.
Danske Bank: Over $2 Billion Fine
Denmark’s largest bank, Danske Bank, was fined over $2 billion for defrauding investors in December 2022 as a result of an elaborative investigation conducted by the US Department of Justice (DoJ). Upon admitting the accusations, the Danske Bank paid $1.2 billion to the DoJ, $178.6 million to the Securities and Exchange Commission (SEC) and $612.4 million to Denmark’s Special Crime Unit making a total of over $2 billion in fines. Danske Bank was denounced for lying to US banks about its deficient AML systems, inadequate transaction monitoring capabilities, and high-risk offshore customer base.
Another case against Danske Bank was issued by the Securities and Exchange Commission (SEC) in the US in December for misguiding its investors regarding the non-compliant anti-money laundering (AML) activities in Estonia. The Danish bank was fined $413 million for the settlement of this case which also covers the penalty of $178.6 million from the first case.
Denmark also confiscated 1.25 billion kroner (€168 million) in profits from transactions by Danske Bank’s subsidiaries.
Credit Suisse: $234 Million Settlement
In October 2022, Credit Suisse, the second largest bank of Switzerland, paid €238 million ($234 million) for the settlement of an investigation conducted by French authorities about tax fraud and money laundering activities.
According to the French, Credit Suisse was involved in a systematic scheme by creating entities in different countries to help clients refrain from declaring certain assets to the French government between 2005 and 2012. €115 million of the total fine amount was charged to compensate for financial damages and lost tax revenue worth over €100 million to the French government. According to the statement by the Swiss bank, the settlement resolved a legacy matter related to the bank’s historical cross-border private banking services and it did not constitute an admission of criminal liability.
USAA FSB Bank: $140 Million Fine
USAA Federal Savings Bank (USAA FSB) received a $140 million fine from the Financial Crimes Enforcement Network (FinCEN) in March 2022 for willful violations of the Bank Secrecy Act (BSA) between 2016 and 2021 and failures in implementing the minimum AML regulatory requirements. The bank accepted the accusation of intentionally failing to operate an appropriate AML program and failing to report numerous suspicious transactions of its customers.
Santander Bank UK: $132 Million Fine
Santander Bank of the UK was fined GBP 107.7 million ($132 million) by the UK’s Financial Conduct Authority (FCA) due to repetitive failures in complying with AML law in December 2022. The compliance failures stemmed from insufficient customer identity verification systems and KYC (know your customer) procedures. The FCA reported that Santander Bank remained disqualified in monitoring and detecting the difference between the declared amount and actual turnover amount of their customers. The bank’s weak AML systems and inefficiency in acknowledging the weaknesses increased its involvement with the risk of money laundering and financial crime.
National Bank of Pakistan: $55 Million Fine
The National Bank of Pakistan (NBP) was charged by the US regulators with failures and violations of AML regulations repeatedly, including insufficient internal checks and risk management. The total amount of $55 million was constituted by two consecutive fines by The Federal Reserve and the New York State Department of Financial Services (NYDFS) which were $20.4 million and $35 million respectively. The report of the Federal Reserve states that the NBP failed in operating an effectively-working risk management process and internal controls which resulted in deficiencies in AML compliance. Although the bank received several legal warnings about its suspicious position and possible AML law breaches, it did not take the necessary precautions in time.
AML Fines in the Crypto World
As the popularity and use of the Virtual Asset Service Providers (VASPs) has been gaining an undeniable expansion in recent years, financial criminals are coming up with new ways to exploit the crypto ecosystem. Naturally, the regulators pay special attention and effort for the regulation of this sector.
In 2022, penalties for violating AML regulations during crypto exchanges were imposed as well. The crypto trading platform called Bittrex had to pay $53 million and the financial services firm Robinhood was fined $30 million for the AML non-compliance.
The surge in AML fines in 2022 demonstrates clearly that the fight against financial crimes has taken a serious turn and regulators are determined to strengthen their positions. However, the big amount of fines also shows that the fiscal penalties might not be effective enough to discourage financial institutions from taking part in illegitimate activities. Financial institutions need to comprehend the effectiveness of their compliance programs and apply constant monitoring to defend the global financial system against the illicit intentions and actions of the criminals.