7 Anti Money Laundering Fines Banks Don’t Know About: Multinational Banks Held Accountable for Non-Compliance
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7 Anti Money Laundering Fines Banks Don’t Know About: Multinational Banks Held Accountable for Non-Compliance

Multinational Banks Held Accountable for Non-Compliance

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7 Anti Money Laundering Fines Banks Don’t Know About: Multinational Banks Held Accountable for Non-Compliance

Financial institutions globally have been fined over $10.4 billion regarding Anti-Money Laundering, Know Your Customer, data privacy, and MiFID regulation in 2020. Banks, large multinational corporations, and companies conducting high-risk activities such as Crypto/digital assets funds and FinTech are being fined at an extreme level for not complying with due diligence regulations. Unfortunately, the trend of financial crime is increasing at an alarming pace.

Anti-money laundering laws all over the world are becoming more and more stringent every year and so do the associated fines. Without using proper bank account verification software, online customer verification solutions, banks may face hefty fines for non-compliance. On January 1, 2021, Congress passed the National Defense Authorization Act which includes the most substantial improvement regarding AML regulation.

This bill includes amendments to the USA Patriot ACT which address a wide range of loopholes in the previous legislation. The US' AML Act 2020 (AMLA) was designed to address changes in the technological landscape and its impact on money laundering. The Act also offers benefits to the Whistleblowers to share cases and information regarding money laundering with the authorities.

Key Elements of the AMLA 2020

The AMLA 2020 offered major changes and amendments which strengthened the penalties for non-compliant banks and financial service organizations. Some key elements of the AMLA 2020 include:

  • Stringent AML Enforcement through improved compensation for whistleblowers.
  • AMLA 2020 expands existing BSA/AML violation penalties
  • AMLA 2020 legislation leverages more government resources committed to tackling money laundering.
  • AMLA provides additional statutory authority for the DOJ to request documents from Foreign Banks and Financial Institutions for uncovering money laundering.
  • The AMLA references a pilot program to share suspicious activity reports across international borders.
  • The AMLA Extends the BSA's reach to cryptocurrency.

7 Anti-Money Laundering Compliance Fines Banks May Miss

Financial institutions globally have been fined $10.4 billion as fines and penalties related to AML, KYC, Data Privacy, and MiFID regulations in 2020. The total of fines since 2008 has accumulated to $46.4 billion. Non-compliance with Anti-money laundering laws and regulations increased the number of fines in 2020. Below are some of the largest fines levied on banking and financial institutions

  1. 2019 Data Breach Leads to Capital One fine of $80 Million

The US Office of the Comptroller of the Currency (OCC) levied an $80 million civil fine against Capital One in August for its mismanagement and weak security systems. The reason provided for the fine was "the bank's internal audit failed to identify numerous weaknesses in its management of the cloud environment and engaged in unsafe or unsound practices that were a pattern of misconduct.

The data breach affected over 140,000 social security numbers and 80,000 bank account numbers. Such large gaps in information security and Anti-Money laundering regulations help support previous computer security and fraud legislation.

2. OCC Fines USAA Federal Savings Bank for $85 Million Penalty

The OCC fined USAA Federal Savings Bank with an $85 million fine for inadequate risk management in October. This is the second fine this San Antonio bank has been slapped with. The reason for the fine was stated as "bank's failure to implement and maintain an effective compliance risk management program and effective information technology risk governance program".

Risk management and compliance programs such as CDD and EDD are mandated by Bank Secrecy Act and recently became a part of Anti Money Laundering legislation. Huge fines are being slapped on financial institutions because they failed to build proper compliance programs.

3. Swedish Bank SEB was Fined $107 Million for AML Failures

Skandinaviska Enskilda Banken (SEB) received a $107 million fine in June for the failure of complying with AML laws. SEB is the second largest bank in Sweden and it has been fined for failing to submit to Swedish Financial Supervisory Authority (FSA), the regulatory body then charged the bank in early June of 2020 and levied the fine which highlights the global issues revolving around AML laws.

Basic AML due diligence includes identity verification, validation, and age verification. Not only are AML violations on the rise, but victims of complex schemes and fraud are also rampant with money service providers.

4. Western Union Refunds $153 Million for Scam Victims

Western Union stopped paying attention to the fraudulent payments made using its money transfer system. Western Union began refunding defrauded customers in March after they were ordered to do so by the Federal Trade Commission (FTC). The lack of proper KYC compliance hurt the organizational reputation and hurt millions of customers.

The FTC had the same complaint against Western Union for many years, and Western Union was aware that fraudsters around the world used the company's money to defraud the customers. The FTC's complaint alleged that Western Union failed to set up effective anti-fraud policies and procedures.

5. Citi has to Pay $400 Million OCC Fine for Failure With Risk Management

Citi Bank, one of the biggest financial institutions globally, has been ordered to pay $400M in a case that shows severe risk management issues. The South Dakota bank was also found to have been lacking internal controls and financial safeguards including those relating to AML and data governance. According to the regulation, Citi bank now needs to do a full re-engineering of processes, and modernization of system applications and information technology infrastructure.

In recent years, this is the second fine Citi bank has been hit with. Citi bank needs to update and comply with regulatory mandates and internal financial controls.

6. Westpac Agrees to Record Aud 1.3 Billion Fine for AML Failures

Westpac is one of the biggest banks in Australia and they agreed to pay AUD 1.3 billion ($959m) for money laundering weak points in September. According to court filings they "failed to keep records related to the origin of the transactions and carry out appropriate customer due diligence".

Westpac admitted to 76,000 other violations including "Failures to reasonably monitor customers for transactions related to possible child exploitation". Also "further failure to assess money laundering and terrorism financing risks". Compliance officers must take note of the challenges that exist for large banks and reevaluate their preparedness to avoid fines and penalties.

7. Compliance Lapses & Fraudulent Accounts Causes Billions in Fines for Wells Fargo

Wells Fargo is the fourth-largest bank in the US, and they have to pay a hefty $3 billion for failure in security procedures. The security and exchange commission will receive $500 million of the total and plans to use the funds to help customers who were defrauded by Wells Fargo.

The reason for the fine levied was "bank pressured employees to cross-sell products and services, leading them to create millions of fake accounts using forged and fraudulent customer signatures." Wells Fargo failed to employ proper KYC compliance procedures and fraud wasn't incorporated into the customer onboarding process.


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