Asia Pacific regulators in China, Hong Kong, Singapore, Malaysia, Taiwan, India and Pakistan have altogether issued almost US$4 billion of fines related to anti-money laundering (AML) and Know-Your-Customer (KYC) violations by end-July, up from last year's US$3.5 billion, said Fenergo recently.
Countries where fines have increased substantially include Pakistan (845% rise compared to 2019 mid-year), Hong Kong (+223%) and Taiwan (+116%) and are a result of increased enforcement actions in response to recent Financial Action Taskforce (FATF) criticisms and concerns highlighted in mutual evaluation reports, according to the firm's mid-year findings on global financial institution fines.Â
Globally, such penalties have totalled US$5.6 billion in the said period, the firm noted.
While financial institutions in the US, Sweden, Germany and Israel were hit hardest, regulators in Malaysia issued two of the highest value enforcement actions in 2020 thus far, the firm observed.
The Malaysian regulator reached a settlement with a major US-headquartered global bank that included a US$2.5 billion penalty and the guaranteed return of $1.4 billion in assets, said the firm, adding that the bank was fined for its role in the theft of billions of dollars from a Malaysian government fund, also known as the 1Malaysia Development Berhad (1MDB) scandal.
While there is a 30% reduction in the value of fines issued to date compared to the same analysis period last year, it is likely that the total enforcement actions issued in 2020 will be on par with, if not surpass, the 2019 total of almost $8.4 billion, said Rachel Woolley, Global Director of Financial Crime at Fenergo.
Though regulatory and supervisory activity may have been impacted by the pandemic, global regulators have reinforced the importance of vigilance and reporting of suspicious activity to ensure the detection and prevention of financial crime throughout the pandemic, Woolley added.
As financial institutions continue to face operational challenges in the months ahead, they may struggle to stay on top of other fraudulent activity brought on by pandemic-related initiatives, such as the US Paycheck Protection Program (PPP) loan program, which may result in enforcement actions later in the year and into 2021, she noted.
