The value of fines is growing in the financial services industry, with a 31 per cent increase in value between H1’24 and H1’23. Breaking down how global financial institutions’ enforcement actions have impacted different regions across the globe, Fenergo, the know your customer (KYC), transaction monitoring and client lifecycle management (CLM) solutions provider has published new findings.
The half-year annual findings from Fenergo reveal which regions have seen the biggest rise in penalties imposed. The Asia-Pacific region saw a 266 per cent increase in penalties between H1’23 and H1’24, totalling $46million. However, when it comes to the single largest value fine, this took place in North America.
The US subsidiary of a Canadian bank was issued a fine of $65million for unsafe practices related to operational, compliance, and strategic risk management controls. The bank was ordered to pay the fine to resolve investigations by The Office of the Comptroller of the Currency (OCC), an independent bureau of the US Department of the Treasury.
From a global standpoint, financial regulators levied 80 fines in the first half of 2024, totalling $263,252,003 for non-compliance with anti-money laundering (AML) regulations. This includes know your customer (KYC), sanctions, suspicious activity reports (SARs), and transaction monitoring violations.
In the same period last year, regulators issued over $201million in penalties for the same types of violations. The findings – which relate to enforcement actions spanning EMEA, North America and Asia Pacific – indicate a multi-year trend of increasing fines, as watchdogs continue to crackdown on illicit behaviour across the globe.
What is causing the fines?
The most significant increase in enforcement action values relate to AML which increased by 87 per cent to $113.2million. Meanwhile, penalties specifically for transaction monitoring and SAR breaches, increased to a staggering $30.5million over the last six months, up from $6million.
Following a similar trajectory, fines for breaches to regulations related to politically exposed persons (PEPs) came in at $26million and KYC fines increased by 102 per cent reaching a record high of $51million in H1’24. Furthermore, in terms of sectors, banks were on the receiving end of the most stringent enforcement actions at $136million followed by digital asset providers ($49.3million), payments firms ($40million) and private banks ($32.1million).
Historically, the second half of the calendar year has seen an uptick in enforcement actions, with financial institutions often looking to quickly settle their fines with regulators ahead of year-end reporting.
Rory Doyle, head of financial crime policy at Fenergo
Commenting on the findings, Rory Doyle, head of financial crime policy at Fenergo said: “With watchdogs increasingly deploying highly sophisticated technology to more effectively identify wrongdoing, the surge in enforcement actions in H1 seems unlikely to abate in H2.
“Financial institutions must take this extremely seriously. These penalties disrupt investor confidence, negatively impact share price, and damage companies’ reputations – consequences many firms, regardless of their size, cannot afford to shoulder.
“To safeguard themselves against the growing risk of watchdog fines, financial institutions must ensure their AML and KYC capabilities are as robust as possible. There can be no downplaying the importance of integrating smarter financial crime technology to enhance processes in this context – particularly as firms continue to grapple with a talent shortage for financial crime professionals.
“Financial institutions that fail to take the necessary precautions, whether large or small, could find themselves in regulators’ crosshairs before the year is up.”
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