AML fines drop as regulators turn their attention to crypto
Enforcement activity of anti-money laundering (AML) is slowing as regulators turn their attention away from banks to cryptocurrency, research has found.
Kroll’s annual Global Enforcement Review 2022 revealed globally the value of fines issued to financial services firms for AML failings fell from $2.2bn (£1.7bn) in 2020 to a new low of $1.6bn in 2021, just half of the $3.3bn seen in 2018.
Meanwhile, last year US regulators imposed more AML-related fines on cryptocurrency businesses, including a crypto exchange being fined $100m.
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“In the Western world, it is almost impossible to find a major, global bank that has not been sanctioned for AML or other financial crime failings in recent years,” said Malin Nilsson, managing director, financial services compliance and regulation at Kroll.
“This is reflective of the predominant focus global regulators have placed on ensuring AML measures are functioning robustly at the world’s major financial services institutions.
“Now that AML-related concerns and failings have resulted in many large banks being sanctioned, regulators are beginning to pay increased attention to other areas of financial services.”
AML management, suspicious activity monitoring, customer due diligence and compliance monitoring and oversight have made up the key AML failings behind the fines from 2016 to 2021.
In the UK, the Financial Conduct Authority (FCA) issued four AML fines totalling $441m last year, which represented over half (58 per cent) the total value of all penalties imposed by the FCA in 2021.
However, Kroll found that AML investigations by the FCA have been slow, and its enforcement action may be declining.
The regulator had 54 open active financial crime investigations as of 31 March 2021, and of these, eight were originally opened in 2016 and 14 in 2017.
And this year, the FCA has only opened three AML enforcement investigations so far.
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“Having opened 13 AML cases in 2016 and 24 cases in 2017, the number of new AML investigations slowed considerably in recent years, with only three cases opened in 2021,” said Nilsson.
“The FCA will be looking either to achieve a public outcome from its existing cases or to close them in order to be able to deploy resource on new investigations, potentially in sectors other than banking.
“Given the huge growth of lightly-regulated cryptocurrency businesses in recent years, the increased level of scrutiny being given to these institutions is one trend we can safely predict will continue to gain momentum.”