Saturday, April 1, 2023

Biggest AML Non-Compliance Fines 2021


Money laundering is without a doubt one of the biggest threats faced by financial institutions from all over the world. Money laundering is a process, where fraudsters move around money under the regulatory body’s radar and convert illegally sourced money into legal funds. Funds can be acquired from drug trafficking, human trafficking, and money earned through any other sources. To prevent the flow of money laundering throughout the financial industry, Anti-Money Laundering laws need to be followed by banks, financial institutions, credit unions, and other businesses. AML programs are mandated by the government in various jurisdictions and are aimed to be used by banks, FinTechs, insurance firms, credit unions, casinos, mortgage lenders, and others.

Failure to comply with AML regulations can lead to huge fines and even prison time. But the constant changes in the rules and regulations of the anti-money laundering directive make it harder for financial institutions to comply with them. Some of the biggest banks even end up spending more than $100 million annually to comply with the regulations. To ensure total compliance with AML regulations, a culmination of human resources and technologies is needed. Using online bank account verification software or online document verification software is one of the biggest ways to comply with these regulations. Even after spending millions and countless hours, not all financial institutions can successfully comply with AML directives. Not being able to comply, inefficient compliance programs, and ignoring the rules and regulations can result in hefty fines by regulatory bodies or prison time.

Major AML Fines in 2020-2021

AML breaches happen all over the world, whether due to a lack of technologies, lack of knowledge, or resources. In the last year itself, over $10.4 billion were fined by regulatory bodies in just the USA alone. Below are the two main examples of money laundering fines. 

1. SEB Bank

In Europe, financial institutions operating in Estonia, Latvia, and Lithuania and the FSA in Sweden fined the SEB Bank a whopping $107 million fine for lack of AML compliance in its operations in the Baltics. SEB Bank was specially mentioned for lack of internal controls and continuous transaction monitoring throughout subsidiary banks in the Baltic state. 

2. Helix

Not just traditional banks and financial institutions, crypto exchanges, and businesses operating in the crypto industry are also being levied huge fines. Helix, a Bitcoin exchange, was fined $60 million by FinCEN for violating the Bank Secrecy Act. The chief operator of Helix “Larry Dean Harmon” will face 20 years in prison. 

Helix was being used as a money-laundering service. They were charging customers to send crypto to any address in a way that hid the true owner of the cryptocurrency. Helix had zero risk assessment policies or customer due diligence programs, Know Your Customer (KYC) procedures or any other basic AML procedures. Ideally, Helix operated as an illegal body.

Common AML Reforms

Every year, AML regulations and fines tend to become more strict to protect financial institutions and stop fraudsters from laundering money. In the U.S the National Defense Authorization Act (NDAA) made huge reforms to the AML laws. The most notable AML reforms are:

  • Additional Beneficial Owners Information: Initially, AML laws were built because the KYC directive didn’t require a business’s beneficial owner’s information. The changes made into the AML laws are aimed at eliminating shell companies, this reform requires companies who do businesses in the U.S to disclose detailed information about the company’s owners, including the name, date of birth, and passport ID.
  • Whistleblower Protection: The rewards for reporting anti-money laundering violations increased from a maximum of 25% to 30% of the penalty. To motivate people to come forward and inform regulatory bodies about AML violations, Whistleblowers are offered better protection against retaliation. 
  • Increased Penalties for BSA/AML Violations: This reform in the AML directive offers increased penalties for banks and financial institutions who violate the AML regulations. Stricter penalties are made to ensure that financial institutions take better care while dealing with AML regulations. 
  • Streamlined SARs and CTR Reporting Requirements: instead of financial institutions, this reform in the Anti-money laundering directive targets governments. Governments themselves have been put on notice to build user-friendly methods for banks to report suspicious activities relating to money laundering or any other financial crime.
  • International Cooperation: As most money laundering happen cross-country, this reform promotes the sharing of policies, best practices, and suspicious activity reports with foreign governments and partners.

Potential Future AML Reforms

In June, FinCEN released its priority list for future changes in the AML regulations. Their list of priorities includes improving all the areas of AML directive such as:

  • Corruption
  • Cybercrime
  • Domestic and international terrorist financing,
  • Financial fraud
  • Transactional criminal organizations
  • Drug trafficking organizations
  • Human trafficking & Human smuggling
  • Proliferation financing

In Europe, the European Commission is working tirelessly to expand the current AML directives and their operations. In Asia, Singapore, Philippines, Australia, and other countries governments are putting their best efforts to reduce the flow of money laundering by increasing fines and boarding the current AML rules and regulations. 


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