Rarely a week goes by that we do not hear of the latest multi-million fine being imposed on a bank or a financial institution or a gaming company for lack of compliance. AML failures that have been highlighted consistently include Know Your Customer, Customer Due Diligence and Monitoring Suspicious Transactions.
Last year 2020 saw some serious fines imposed upon some top US banks such as Goldman Sachs, Wells Fargo and JP Morgan (collectively amounting to almost $7 billion) as well other European counterparts such as Deutsche Bank ($216.1 million), the Baltic subsidiaries of Sweden’s SEB Bank ($107 million) and Commerzbank’s London branch (£37.8 million).
In 2020, a total aggregated sum of €22 billion in fines was imposed on banks globally with the US, Australia and Israel, Sweden and Germany ranking as the top 5 countries affected.
The trend appears to continue in 2021. Just recently, gaming giant Casumo was fined £6 million by the UK Gambling Commission for anti-money laundering and social responsibility failings.
While some may argue that this is the cost of doing business, the true cost of these fines goes well beyond the financial implications. The damage to reputation is huge and it can take years for such companies to recover from the impact. The above examples show that not even large organisations have escaped unscathed despite the huge investments in resources and the necessary technology.
Both improved development of technology as well as new financial instruments and the heat of the pandemic have given way to new opportunities for criminals. Gaps in emerging sectors such as crypto currency have increased the risk of financial crime.
Enforcement and new legislations in the US and Europe seek to address these increased risks and ensure that gaps are closed. It is then responsibility of related businesses to remain on top of new laws, such as the 6AMLD in Europe which sees a renewed need for integrating Artificial Intelligence and Machine Learning with the human element in the right way so as to balance their investments and resources with the ultimate goal of remaining compliant. From a financial perspective, one just needs to look at the various case studies to understand that the non-compliance fines by far outweigh the cost of the investment in technology and human resources and this does not even take into consideration of the cost on the reputational damage or business disruption.
Ultimately it is key for all parties including regulated entities, regulators and fintech/regtech providers to work hand-in-hand towards the common goal of fighting financial crime together by being always one step ahead of criminals. Collaboration and communication is therefore of utmost importance.