Fines For Global Banks Top $36 Billion For Sanctions Violations

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A look at the record sanctions violations by financial institutions in the year 2019.

  • 2019’s record additions of $10b sees 12 of the world’s top 50 banks penalised
  • Amid global trade tensions, sanctions violations make up 40% of 2019 fines
  • 2020 shaping up to be a bumper year for banking fines

DUBLIN – IE, 29th January, 2020Fenergo, the digital enabler of client and regulatory technology for financial services, today released its annual report on global banking fines which shows global penalties topped $36b since the financial crisis. 2019 was a near record, the second highest on record, with almost $10b in AML and sanctions fines, a 160% increase from the last report total of $3.8b in 2018.

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Twelve of the world’s top 50 banks were fined for non-compliance with AML, KYC and sanctions violations in 2019. By country, Switzerland was the biggest offender in 2019 after a tier one Swiss bank received the biggest single fine at $5.1b for AML breaches by the French Criminal Court. The fine exceeds the bank’s 2018 net profit of $4.9b by 4%. Italian banks were the second biggest offenders in 2019, racking up USD $1.5b in total fines for sanctions violations and GDPR breaches.

Details of sanctions violations

Marc Murphy, CEO of Fenergo says “There’s no sign of regulation slowing down. The rise in financial crime and increasing regulation is creating a tough battleground for financial institutions trying to stay on top of a multitude of regulatory rules across different jurisdictions. We are still seeing the ramifications from the financial crisis, increased regulations — banks need to keep up or risk serious penalties. Institutions are turning to technology to make sure they’re on the right side of the law.

Over two thirds (63%) of US fines were aimed at European financial institutions for AML breaches and sanctions violations with countries such as Iran, Cuba, North Korea, Sudan, Libya and Myanmar. The top US regulator by fines was the Department of Justice (DoJ) with over USD $1.3b in fines issued. This includes an enforcement action imposed on one of the world’s top 20 banks which incorporated a forfeiture of USD $717.2m for the absence of an effective, global sanctions-compliance infrastructure and a lack of management oversight which resulted in sanctions violations. The fine came after a review by US regulators which discovered the institution had made 2,600 outbound U.S. dollar payments, valued at approximately USD $8.3b, to high risk countries including Iran, North Korea and Sudan.

The rise in sanctions fines in 2019 reflects the geopolitical climate in the United States. 86% of all fines levied by US regulators since Fenergo’s last report in 2018 were for sanctions violations. Economic sanctions against high risk countries such as Iran are imposed by governments to protect national security and prevent the funding of terrorist activity. Financial institutions are required to be vigilant in identifying sanctioned entities and individuals through robust screening processes. Financial Institutions were fined a further $82.7m for data privacy and MiFID violations.

Laura Glynn, Global Compliance and Regulatory Director, Fenergo says: “2019 was another record year for fines, the second biggest in history, and 2020 is shaping up to be a very busy year in this space. Our report is mainly AML and KYC based, but we have included recent fines for breaches across other regulatory areas, such as infringements under GDPR. While these specific fines in 2019 are small in comparison to the AML fines, and less numerous than anticipated, this is largely due to regulators giving financial institutions leeway to embed their controls and demonstrate efforts to comply. This honeymoon period is waning, so we expect more penalties to arise from non-compliance in 2020.

The data highlights a trend for US regulators to impose tougher penalties on foreign financial institutions compared with domestic institutions. Since September 2018 a total of 19 fines were handed to EMEA banks with headquarters in France, Israel, Italy, Switzerland, UAE and the UK, at a total value of $4.1bn compared to just $246 million in fines issued to US institutions. Average fine values to EMEA headquartered banks were 10 times higher (USD $216m) in the same period than those imposed to US institutions (USD $20m).

Rachel Woolley, Global AML Manager, Fenergo, said: “The scale of financial crime continues to grow while the methods used by criminals to launder the proceeds of crime evolve. Our 2019 fines analysis shows that many of the financial institutions penalised lacked appropriate systems and compliance infrastructures that are necessary to identify and address areas of high risk. Effective regulation technology is no longer a ‘nice to have’, it’s essential for the future of banking and the reduction in global financial crime.” 


About Fenergo

Fenergo is the digital enabler of client and regulatory technology for financial services.

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About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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