Fines for money laundering breaches total around $930m globally, drop 40% in second pandemic year

Penalties imposed on global finance companies for breaching anti-money laundering rules almost halved in the first six months of 2021 as compared to the same period in 2020.

Penalties for non-compliance with AML and know-your-customer regulations dropped 40% in the first half of 2021 to total around $930m globally, according to data compiled by fintech Fenergo and seen by Financial News

It comes despite widespread predictions of an uptick in financial crime during the pandemic as stuck-at-home workers spent more time on the internet and mobile phones, and less time within sight of compliance workers or bosses. 

“In recent years, the enforcement actions levied against financial institutions have been at record highs as a number of major scandals were investigated and concluded by regulators,” Rachel Woolley, the global director of financial crime at Fenergo, said. “This year we’re seeing something markedly different, with the total value of fines issued at the halfway point of the year much lower than last year.”

City firms should still brace for a spike in pandemic-related enforcement activity, however.

READ ‘It’s still too easy to launder money in London,’ warns top law enforcer 

The drop in enforcement activity “doesn’t mean there is less financial crime occurring,” Woolley said, adding that pandemic-related misconduct should prompt an uptick in penalties issued in the coming months.

“The scale of fraud that took place during the pandemic, particularly in the US, will prompt investigations into financial institutions for facilitating the crimes due to ineffective systems and controls,” she said. “This will lead to enforcement actions further down the line.”

Of the 31 countries tracked as part of Fenergo’s study, US regulators issued the most in fines in the first half of 2021 with penalties imposed by its enforcement agencies totalling $711m. UK regulators issued just $32.9m in fines over the same time period, leaving the UK fourth in Fenergo’s rankings, below Switzerland, and Norway.

In September, Graeme Biggar, the director-general of the National Crime Agency’s National Economic Crime Centre, warned that London remained a safe haven for so-called ‘dirty money’ as criminals exploit Britain’s eagerness to attract foreign investment. Biggar told FN then that it’s still “too easy” for criminals to launder money in the UK capital despite the government’s efforts, such as imposing sanctions for illicit financial transactions.

Calls for the UK  to rethink its approach to stamping out money laundering have been mounting since the country’s exit from the EU enabled its policymakers to set their own regulatory standards for the first time in a generation. 

READ  Can the City finally crush dirty money after Brexit?

Steve Elliot, managing director of LexisNexis Risk Solutions, said in July that the UK’s “complex, burdensome regulatory framework” was failing to adequately prevent money laundering within the country. “Overall, financial crime is estimated to cost the UK £37bn a year, yet only 1% is thought to be detected, despite firms spending £28.7bn a year to tackle the issue,” he said then.

Fenergo’s Wolley said there was scope for improvement in AML regimes globally. “Financial crime today is ever-evolving and as an industry it is critical that we establish a common best practice approach,” she said, adding that technology should be used to replace “onerous manual” know-your-customer and AML risk assessment and compliance processes.

To contact the author of this story with feedback or news, email Lucy McNulty

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