After witnessing a costly year of enforcement fines in 2020, the industry saw a significant drop in these types of charges in 2021. Further findings from Fenergo show that the value of penalties in 2021 was down by nearly half (49%) from the previous year.
Last year, enforcement actions against financial institutions and their employees totaled $5.4 billion for violations of anti-money laundering (AML) and data privacy regulations, compared to $10.6 billion in 2020. Aside from the financial differences, the industry saw a significant drop in the number of fines against financial institutions for compliance breeches – 176 in 2021 versus 760 in the previous year.
Rachel Woolley, the global director of financial crime at Fenergo stated that, “The decrease in fines in 2021 is largely attributed to a reduction in the number of multi-billion-dollar fines compared to previous years. The pandemic has also impacted regulatory investigations; regulators weren’t able to initiate as many on-premise investigations in the last two years which has likely had a knock-on effect on enforcement actions.”
While the numbers were ultimately lower in 2021, one of the most notable and most costly fines to come out of the year was a $2.03 billon penalty issued to a major Swiss bank by the French Court for historic tax fraud. Back on US soil, regulators issued $673.2 million in enforcement actions to foreign banks. In one of these cases, a $100 million fine was issued to the UAE’s oldest private bank, Mashreqbank PSC, for illegally processing more than $4 billion of payments linked to Sudan. Overall, the average fine value for AML-related compliance breaches in 2021 was $34.4 million, with the majority of these fines ($11.5 million) coming from General Data Protection Regulation (GDPR) breaches in Europe.
In response to the findings, Woolley warned, “With criminals using more sophisticated methods for hiding illicit gains such as crypto currencies and other virtual assets, the clock is ticking for financial institutions to adopt technology that provides a holistic view of customers and the risk they potentially present, as well as identifying activity and behaviors that could indicate criminal activity. Until they do, we will continue to see damaging enforcement actions being handed out by regulators.”