2021 was another difficult year for the financial industry as the effects of the coronavirus pandemic continued to create negative consequences for banks and financial institutions. That trend included a range of new compliance challenges as service providers and financial regulators adapted to a shifting risk landscape and an array of emerging Covid-19-inspired criminal methodologies.
The amount of AML fines issued in 2021 reflects the increased regulatory scrutiny. After investigations are completed, 2021’s AML fines are expected to exceed $2.22 billion – matching the 2020 total. With those figures in mind, numerous regulators took significant enforcement actions against banks and financial institutions under their jurisdiction in 2021. Some notable examples from around the world include:
Financial Conduct Authority (FCA): United Kingdom
In 2021, the UK’s Financial Conduct Authority prioritized the threat of cyber-crime, which increased during the Covid-19 pandemic as customers transitioned en-masse to online banking and financial services. The FCA also focused on corporate compliance, opening around 1,293 enforcement cases and issuing around £189.8 million in penalties.
While FCA issued a £147,190,200 compliance fine to Credit Suisse in October 2021, its largest fine came at the end of the year, when it handed down a fine of over £264 million to NatWest for significant failures to monitor and report suspicious transactions related to jeweler Fowler Oldfield. In the final days of 2021, FCA also issued a fine of £63.9 million to HSBC for failing to address long-term weaknesses in its transaction monitoring controls. Another notable FCA fine handed down in the final days of 2021:
Enforcement target bank: National Westminster Bank PLC (NatWest)
Reason for enforcement action: Significant AML compliance failures
Amount of fine: £264,772,619.95
Australian Transaction Reports and Analysis Center (AUSTRAC) – Australia
In 2020, Australian Transaction Reports and Analysis Center took a significant enforcement action against the Westpac Banking Corporation for serious breaches of Australia’s AML/CFT Act, including a failure to implement transaction monitoring and customer due diligence controls. AUSTRAC ultimately handed Westpac a record $1.3 billion fine. In 2021, Westpac was fined an additional $113 million by the Australian Securities and Investment Commission (ASIC) which cited the bank’s ‘poor compliance culture’ as a factor in its misconduct.
In 2021, AUSTRAC maintained its focus on corporate enforcement but did not issue any AML fines. AUSTRAC did, however, issue a remedial direction to Australian Military Bank Ltd (AMB) to ‘review and uplift’ its compliance with AML/CFT laws. The direction included requirements that AML submit to an independent audit, enhance its AML/CFT reporting protocols, and then submit to an additional audit to ensure the implementation of those measures. In June of 2021, AUSTRAC revealed an investigation into National Australia Bank NAB) for ‘potential serious and ongoing non-compliance’.
Enforcement target bank: Australian Military Bank
Reason for enforcement action: AML compliance deficiencies
Amount of fine: N/A (remedial direction)
Office of Foreign Assets Control (OFAC) – United States
Under President Biden, the US continued to emphasize sanctions compliance, building on trends established during the Trump administration, which took a record 3,900 sanctions actions between 2016 and 2020. In 2021, the Office of Foreign Assets Control took 20 separate enforcement actions against individuals and organizations, totaling $20,896,739.22 in fines. The largest OFAC sanctions fine was issued in January against Union de Banques Arabes et Françaises for violations of the US’ Syria sanctions program.
Enforcement target bank: Australian Military Bank
Reason for enforcement action: Violation of US Syria sanctions program
Amount of fine: $8,572,500
Bank Secrecy Act (BSA) – United States
The BSA is the US’ primary AML legislation and is enforced by the Financial Crime Enforcement Network (FINCEN). In 2021, FINCEN imposed several significant AML fines against US banks and other financial service providers for failures to comply with the requirements of the BSA. FINCEN issued its most significant fine against credit card company, Capital One, in January 2021, for willful and negligent violations of the BSA, including a failure to file thousands of suspicious activity reports and currency transaction reports. The fine amounted to $390 million.
Enforcement target bank: Capital One
Reason for enforcement action: Violation of the Bank Secrecy Act
Amount of fine: $390,000,000
Monetary Authority of Singapore (MAS) – Singapore
Like other regulatory authorities, the Monetary Authority of Singapore focused on addressing the financial challenges of the Covid-19 pandemic during 2021. The regulator took several enforcement actions in response to violations of the Corruption, Drug Trafficking and Other Serious Crimes Act (CDSA), including a S$1 million fine for Bank J Safra Sarasin for ‘serious breaches of MAS’ AML/CFT requirements’. However, MAS most significant fine of 2021 was issued against Goldman Sachs’ Malaysian subsidiary as part of a deferred prosecution agreement with the US Department of Justice over the 1Malaysia Development Berhad scandal. Under the penalty, Goldman Sachs was required to pay the Singapore government $122 million.
Enforcement target bank: The Goldman Sachs Group Inc
Reason for enforcement action: Violations of the Prevention of Corruption Act
Amount of fine: $122 million
Looking ahead to 2022, with a potentially-reduced focus on Covid 19, it will be interesting to see how regulators choose to execute their oversight responsibilities.