Anti-money laundering (AML) programs provide a set of measures within financial institutions to prevent fraud, money laundering, terrorism financing and other financial crime. AML programs are mandated by the government in various jurisdictions and are aimed at financial service providers, including banks, fintechs, insurance firms, credit unions, casinos, mortgage lenders and more.
Failure to comply with AML regulations can mean substantial fines and even prison time. Yet every year, inadequate AML compliance leads to severe penalties and loss of reputation for firms around the world.
Notable AML Fines in 2020 – 2021
AML breaches occurred around the world, and financial companies were fined a collective $10.4 billion last year in the U.S. alone. Following are just two examples of money laundering scandals that led to large fines.
In Europe, financial officials in Estonia, Latvia, and Lithuania, and the FSA in Sweden, gave SEB Bank a $107 million fine for AML failures in its operations in the Baltics. SEB Bank was specifically cited for a lack of internal controls and transaction monitoring throughout subsidiary banks in the Baltic states.
Fines are also being levied in the cryptocurrency sphere. Helix, a bitcoin ‘mixer’, was fined $60 million by FINCEN for Bank Secrecy Act (BSA) violations. Larry Dean Harmon, the chief operator, also faces 20 years in prison.
Helix was essentially a money-laundering service, charging customers to send crypto to any address in a way that concealed the true owner of the crypto. Helix had virtually no true risk assessment, customer due diligence, know your customer (KYC) procedures or other standard AML processes. Essentially, it operated to aid illicit activity.
Every year, AML regulations (and fines) tend to become more strict to protect the financial system. In the U.S., the 2021 National Defense Authorization Act made comprehensive reforms to AML laws. The most notable changes are:
- Additional Beneficial Owners Information: Aimed at eliminating shell companies, this reform requires companies who do business in the U.S. to disclose detailed information about the company owners, such as name, date of birth and passport ID.
- Whistleblower Protection: Rewards for reporting AML violations increased from a maximum of 25% to 30% of the penalty, and whistleblowers are provided with greater protection against retaliation.
- Increased Penalties for BSA/AML Violations: The act enables additional civil penalties for both individuals and companies who violate these laws.
- Streamlined SARs and CTR Reporting Requirements: With this reform, the government itself has been put on notice to make it easier to submit suspicious activity reports (SARs) and currency transaction reports (CTRs).
- International Cooperation: Recognizing that money laundering rarely stays within a country’s borders, the act promotes the sharing of policies, best practices and SARs with foreign governments and affiliates.
Anti-Money Laundering Resource
5 Key Qualities of a Successful AML Compliance Program
Upcoming AML Reforms
In June, FinCEN published its priorities for upcoming AML regulations. The priorities include just about all areas of AML: corruption, cybercrime, domestic and international terrorist financing, fraud, transnational criminal organizations, drug trafficking organizations, human trafficking and human smuggling, and proliferation financing.
Additionally, last week, FinCEN announced it is seeking public comment on new regulations for antiquities dealers.
In Europe, the European Commission is busy expanding AML efforts and is working on the 6th Directive on AML/CFT (AMLD 6). And throughout Asia, from Singapore to the Philippines to Australia, governments are increasing fines and broadening the scope of their AML regulations.
Which Acts Of AML Non-Compliance Receive The Heaviest Fines?
The U.S. and UK are known as the toughest AML enforcement watchdogs, usually doling out the heftiest money laundering fines. But in recent years, other foreign financial organizations have followed the U.S. and UK lead on AML enforcement actions and have started handing out major fines to non-compliant financial organizations.
The value of fines usually differs by the type of crime, the amount of money involved, the length of time the crime has been ongoing, etc. Financial crimes and AML violations can also result in jail time, usually set at a maximum of 20 years.
Work With Jumio To Improve Your AML Compliance
So what are the takeaways? With a constantly shifting regulatory landscape, your AML compliance solution must be able to stay ahead of the criminals as well as the regulators. Your compliance program must include screening for sanctions and politically exposed persons (PEPs), both during onboarding and throughout the customer lifecycle. And it must include sophisticated transaction monitoring capabilities. Jumio AML Solutions are designed by AML experts to help you meet these regulatory obligations and protect your reputation, all within a streamlined platform in the cloud.
Let a Jumio expert show you how easy it can be to integrate our solutions into your compliance program. Contact us here, and we will be in touch shortly.