Industry

Top AML fines and penalties businesses should know

Read about which AML violations levy the biggest penalties, examples of recent AML fines, and more.

An icon of two people and a danger sign representing aml fines.
Read time:
Share this post
Copied
Table of contents
⚡ Key takeaways
  • Over $4 billion in AML fines were issued in 2022 alone — with three quarters of that coming from the U.S.
  • The sectors that faced the most AML fines in 2022 include trading and brokerage, banking, gambling, and more.
  • Of the $4 billion in AML penalties issued in 2022, $2.5 billion came from three high-profile compliance failures.

The global financial crisis in 2008 rolled out the red carpet for anti-money laundering (AML) fines, with one report estimating that total penalties have surpassed $56 billion to date.

Over $4 billion in fines were issued in 2022 alone — with three quarters of that coming from the U.S.

The recent increase in enforcement shouldn’t come as a surprise, given the passage of the AMLA (Anti-Money Laundering Act of 2020). It’s the most significant anti-money laundering legislation passed by Congress in decades, a signal that authorities are focused on financial crimes.

In this article, we look at where those AML fines came from, the most common AML violations, and how you can protect your organization from money laundering.

AML fines in 2022 by sector

In 2022, global fines for money laundering and financial crime increased by more than 50%, with organizations across all sectors found lacking when it comes to proper preventative protocols.

The sectors that faced the most AML fines in 2022 were:

  1. Trading and brokerage: $6 billion
  2. Banking: $2 billion
  3. Gambling: $71.4 million
  4. Cryptocurrency: $30 million
  5. Asset management: $2 million

Which AML violations levy the biggest penalties?

Countries and regions have unique AML laws and thus different penalties for violations.

The U.S. alone has several different legislations governing financial crime, including the AMLA, the Bank Secrecy Act, the Money Laundering Control Act, and the USA PATRIOT Act.

Typically, non-compliance results in fines, sometimes substantial ones, and even sanctions or imprisonment.

However, severe punishment is usually reserved for malicious or egregious compliance failures. This occurs if organizations knowingly launder money, cover up offenses, or fail to implement basic security measures.

These security measures include:

Source of funds checks

Organizations must make appropriate efforts to ensure that a customer has acquired the funds legitimately to complete a transaction.

They can do this with source of funds checks, which review customers’ financial history to identify suspicious activity.

The process works congruently with wealth checks – which analyze money accumulated over a clients’ lifetime – to ensure that the customer has obtained funds legally.

Customer due diligence

Organizations are expected to perform ongoing due diligence checks to verify customers’ identities and spot fraudulent activity.

This requirement is outlined in the Customer Due Diligence (CDD) Rule issued by the FinCEN (Financial Crimes Enforcement Network), which states that covered financial institutions must “identify and verify the identity of the natural persons (known as beneficial owners) of legal entity customers who own, control, and profit from companies when those companies open accounts.”

Politically exposed persons background check

The definition of a politically exposed person (PEP) varies slightly by jurisdiction and is generally described as someone in a public, high-ranking position of power and influence.

Such individuals pose a greater risk of financial crime, such as corruption, bribery, or money laundering.

Organizations are expected to conduct background checks to determine if existing or prospective customers — and their related parties — are PEPs.

These checks form part of the due diligence process under Know Your Customer (KYC) and AML frameworks.

Examples of recent AML fines

Of the $4 billion in AML penalties issued in 2022, $2.5 billion came from three high-profile compliance failures.

1. Danske Bank

In December 2022, Danske Bank forfeited $2.06 billion after its improper AML measures resulted in fraudulent transactions.

The U.S. Department of Justice, which investigated Danske’s practices, found that the bank had defrauded partners in the U.S. about Danske Bank Estonia customers who lived outside the country, including in neighboring Russia.

Danske was charged with having insufficient AML systems, inadequate transaction monitoring capabilities, and high-risk customers.

These oversights resulted in “highly suspicious and potentially criminal transactions”  taking place via U.S. banks, through which Danske processed more than $160 billion on behalf of non-residents between 2008 and 2016.

2. Credit Suisse

In October 2022, Credit Suisse agreed to pay €238 million ($234 million) to settle a tax fraud and money laundering case that began in France.

The settlement concerned an alleged scheme in which Credit Suisse helped clients avoid declaring certain assets to the French government.

Prosecutors said that the practice occurred between 2005 and 2012, and caused more than €100 million ($106 million) in “fiscal damage.”

The settlement fee covers compensation for the financial damage plus lost tax revenue for the French government.

3. Santander UK

In December 2022, the UK’s FCA (Financial Conduct Authority) fined Santander UK £107.7 million ($132 million) for repeated anti-money laundering compliance failures.

These include “ineffective systems for verifying the information provided by customers about the business they would be doing” and improper monitoring of transactions.

The FCA also highlighted Santander’s failure “to properly monitor the initial amount declared by the customers with the actual turnover of the client.”

Mark Steward, the executive director of enforcement and market oversight at the FCA, said that Santander’s practices “created a prolonged and severe risk of money laundering and financial crime.”

Free white paper
See how experts evaluate AML solutions

How to avoid AML fines

As regulations continue to change in reaction to the environment, there are ways you can protect your fintech from money laundering to meet today’s AML compliance requirements as well as prepare for future regulations.

Persona’s identity infrastructure provides a flexible and simple system to:

  • Monitor transactions and flag suspicious transaction patterns through Graph
  • Automate filing suspicious activity reports (such as cash transactions exceeding $10,000, as mandated by U.S. law) through Workflows and Cases
  • Generate alerts with Reports when sanctioned individuals and organizations are added to watchlists and other reports
  • Collect and verify information about users through Verifications and Dynamic Flow

Interested in learning more? Get a demo or start for free today.

Frequently asked questions

What are the penalties for failing to comply with AML regulations?

The penalties for AML non-compliance can vary. However, the Bank Secrecy Act gives regulators the authority to impose penalties of $5,000-$1 million per violation or 1% of the assets of a financial institution (whichever is greater) for every day a violation occurs.

Meanwhile, the AMLA states that offenders can face fines of up to three times the profit gained from laundering funds. It also contains enhanced penalties for violations of the Bank Secrecy Act and USA PATRIOT Act to include gains obtained by insiders and bonuses paid to executives.

What triggers AML investigations?

AML investigations usually begin with a trigger event, which simply means that regulators have detected suspicious behavior.

Trigger events can be grouped into three categories:

  • Internal knowledge (such as the discovery of high-risk transactions)
  • External knowledge (such as negative news about the client)
  • Client driven (such as notification of a change in employment status or business activity)

What is considered high-risk?

“High risks” are individuals or countries deemed suspicious due to past or current behavior.

For instance, a high-risk customer might be someone who makes unusual transactions — whether they are uncharacteristically large, lack an obvious economic or lawful purpose, or lend themselves to anonymity.

A PEP can also be considered high risk, as is someone who has personal or business deals with high-risk countries.

High-risk countries are those with significant inadequacies in their anti-money laundering measures.

These can include nations with high levels of corruption according to Transparency International’s Corruption Perceptions Index, or those that have been designated as high risk by the FATF (Financial Action Task Force).

Continue reading

Continue reading

Identity challenges in the travel industry: How hospitality businesses can fight fraud
Identity challenges in the travel industry: How hospitality businesses can fight fraud
Industry

Identity challenges in the travel industry: How hospitality businesses can fight fraud

Identity fraud in the travel industry has become increasingly common. Here are some common identity challenges and potential solutions businesses need to know about.

How digital health apps can overcome four barriers to converting users
How digital health apps can overcome four barriers to converting users
Industry

How digital health apps can overcome four barriers to converting users

New patients might abandon onboarding if they’re confused, frustrated, or overwhelmed. Here are four ways digital health apps can improve conversion.

How to create scalable and compliant international KYB processes
How to create scalable and compliant international KYB processes
Industry

How to create scalable and compliant international KYB processes

Industry experts discuss international KYB and debunk common myths while sharing how to build a scalable global KYB process.

What is anti-money laundering (AML), and why is it important?
Industry

What is anti-money laundering (AML), and why is it important?

Learn about the stages and harms of money laundering, key AML regulations, and how to meet constantly evolving compliance standards.

AML screening: Why it's important and how it works
Industry

AML screening: Why it's important and how it works

AML screening is the process of checking whether customers pose a specific risk of money laundering. Learn more.

The AML compliance checklist: best practices, tools, and processes
Industry

The AML compliance checklist: best practices, tools, and processes

In this AML checklist, we’ll briefly go over the five AML pillars, then dive into four processes that can help improve AML compliance.

Ready to get started?

Get in touch or start exploring Persona today.