Asia Pacific has seen the single biggest rise in regional financial non-compliance fines from US$6.6 million in 2019 to US$5.1 billion for the year to date, said Fenergo recently when releasing the results of a global research on financial institution fines.
Meanwhile, penalties have totalled US$10.4 billion for non-compliance with anti-money laundering (AML), know your customer (KYC), data privacy and MiFID (Markets in Financial Instruments Directive) regulations in the said period, according to the the lifecycle management and regulatory compliance technology company.
Global finding highlights
- The total volume of fines levied to financial institutions for these breaches was 198, a year-on-year increase of 141%.
- The average value of enforcement actions against financial institutions for AML related compliance breaches is 44% lower than in 2019.
- Landmark action against Goldman Sachs totalling US$6.8 billion (from multiple regulators) for its involvement in 1MBD scandal — including the second biggest enforcement action imposed against one bank since 2015.
- Major Australian bank fined almost US$1billion for its money laundering scandal with links to serious crimes.
- In 2019 nine fines amounting to US$2.4 billion were issued by US regulators to foreign banks (UK and Italy) for sanctions violations. This year there was just one significant sanctions fine by the Office of Financial Sanctions Implementation (OFSI) to a UK bank for breaking Russian sanctions violations. It was the largest ever fine imposed by the regulator at US$25.4 million.
- 203 individuals were fined US$88.8 million for AML and MIFID breaches in US, Europe and China.
- Global data privacy fines amounted to $88.6 million
Malaysia, Australia had the biggest enforcement actions in APAC
While 2015 was a record year for enforcement actions, 2020 has the potential to match or top that year’s total if significant investigations are concluded by the end of the calendar year, said Rachel Woolley, Global Director of Financial Crime at Fenergo.
There have been two notable shifts, according to her.
“APAC has overtaken the US in terms of the value of enforcement actions for the first time since 2015 – driven by recent FATF activity and the repercussions of the 1MDB scandal, and there has been an increased focus on individuals being penalised than we have seen in previous years,” Woolley pointed out.
In addition to imposing penalties on financial institutions, regulators and authorities in China, the UK and the US have held individuals accountable for compliance failings, she noted.
While banks may hold reserves explicitly to settle enforcement actions, individuals will suffer a far greater personal impact, she added.
This along with greater whistleblowing protection and incentives will make a difference in tackling the industry-wide issue of financial crime, Woolley said.
Regulators in APAC, including the Malaysia Securities Commission and AUSTRAC in Australia, were among those handing out the biggest enforcement actions to banks involved in the 1MBD scandal and the Australian bank embroiled in a high-profile money laundering scandal, according to Fenergo.
However, the US Department of Justice was also more punitive this year, issuing enforcement actions totalling US$1,924,071,850 to Goldman Sachs, Bank Hapoalim and Union Bancaire Privée, the company added.
Collectively, financial institutions headquartered in the US received the highest value of fines, accounting for US$7,489,785,116, the firm noted, adding that the fines levied towards Goldman Sachs accounted for 91% of the US total.
Countries that issued the most fines by value are as follows, according to Fenergo.
USA: US$4,348,701,664
Malaysia: US$3,900,000,000
Australia: US$921,587,910
Sweden: US$550,169,770
UK: US$199,306,927
Significant increase in data privacy fines
There was also a significant rise in the number of data privacy fines this year while the administrative sanctions handed out for MiFID violations are lower in volume and value compared to 2019, the firm said.
In 2020 a total of 36 fines were issued to financial institutions and individuals at the value of US$7 million, compared to 2019 when two fines alone amounted to US$81.5 million.
On the data privacy side, while GDPR fines are comparable to 2019 at US$1.7 million, the number of data privacy fines issued in the APAC region increased significantly with a large US$529,027 fine issued in India and seven fines issued in China totalling US$6,338,969.
The most significant fine levied for data privacy was to Capital One for US$80,000,000 by US regulator, Office of the Comptroller of the Currency (OCC), for its 2019 cloud data breach.
