In recent years, Anti-Money Laundering (AML) has become increasingly vigilant among governments and financial institutions. This has resulted in some of the biggest AML fines ever seen, as non-compliance with AML regulations can result in hefty penalties. In this blog, we’ll explore AML fines in depth, what they mean, and some of the most considerable AML fines to date.
An Anti-Money Laundering fines or AML Fines is a financial penalty issued to an individual or company that fails to comply with AML regulations. It’s important to note that the size of the fines can vary greatly, as the severity and extent of non-compliance determine them.
The maximum money-laundering fines vary by jurisdiction. For example, in the USA, money laundering fines reach up to $500,000 per violation of the property involved.
Money laundering fines are imposed to deter and punish those who don’t comply with the AML regulations. It also acts as a deterrent for other financial institutions so that they take their AML obligations more seriously. Fines can be issued for various reasons, such as failing to carry out customer due diligence or needing adequate systems and controls to monitor customer activity.
The fines for failing to meet Anti-Money Laundering (AML) standards are one of the key measures for preventing and fighting financial crime at the financial companies level. Banks and companies are compelled to apply severe anti-money laundering measures to avoid allowing money laundering and other related offenses. When such institutions are found not to have complied with the AML regulations in place they are subjected to hefty fines and penalties.
A money laundering fine is given out by the FCA (Financial Conduct Authority). They will assess the case and use certain factors to determine what kind of financial penalties should be issued. These include:
Once all of these factors have been considered, the FCA will decide on an appropriate AML fine and penalties.
During 2024, the spectacular growth of fines for AML violations goes on in different spheres with special concern to financial establishments, real estate agencies, lawyers, and casinos. The reasons behind these penalties are diverse thus including inadequate research on a partner before engaging in business with it to complete negligence of AML responsibilities. Through the two cases, it is apparent that the trend of regulation is quickly shifting towards holding organizations accountable for not doing all they can to block money laundering. These are some of the largest fines for AML that have been issued this year.
Two prominent Las Vegas casinos, MGM Grand and The Cosmopolitan, were collectively fined $7.45 million for violating AML regulations related to an illicit sports betting scheme. According to the U.S. Attorney’s Office for the Central District of California, the casinos failed to meet the Bank Secrecy Act (BSA) requirements for reporting suspicious transactions. Former MGM Grand President Scott Sibella admitted to not reporting such transactions during his tenure from 2017 to 2022. The case involved Wayne Nix, who operated an illegal sports betting ring, with Sibella knowingly allowing him to gamble at MGM Grand, bypassing essential Source of Funds (SOF) checks, which potentially enabled money laundering.
Both Deutsche Bank as well as its participants in the United States was fined $186 mn due to inadequate AML controls. The fact that they received some warnings from the regulators but did not take the necessary steps to address the problems led to one of the year’s most severe penalties. This is a perfect example of the negative effects borne out of the ability to close previously recognized compliance issues, including for globally established financial institutions.
Fairbrother & Darlow, a UK-based law firm, was fined £16,000 by the Solicitors Regulation Authority (SRA) for AML non-compliance over six years. The firm failed to conduct a firm-wide risk assessment and implement the required policies under the Money Laundering Regulations of 2017. Despite submitting a declaration of compliance in 2020, they only achieved compliance in 2023. The fine reflects the severity of the firm’s neglect, although the SRA acknowledged their cooperation and remedial efforts.
In the UK, HMRC levied more than £1 as fines respecting small business groups. 6 million on 254 estate agents for their failure to register or to re-register for AML compliance. The penalties varied from £1,500 up to over £50, 000. This seems to be a fundamental breach of the Money Laundering Regulations (MLR) and the majority of businesses either chose to deliberately or otherwise were oblivious to the need to register with HMRC. Other breaches that attract the penalties are other inadequacies such as documentation and half-baked CDD pointing to the importance of estate agents observing remarkable AML standards.
Germany’s financial market regulator BaFin fined a $1. subsequently, On May 17th, 2017, Commerzbank was charged $5 million for its inability to conduct AML responsibilities. Commerzbank AG and its previous firm comdirect Bank AG have been accused of inadequate supervision extending to delays in updating the customers’ data and data security. Failure to perform this due diligence failed to meet some of the AML obligations, thus showing that even such large players have to beef up their AML controls from time to time.
It is like the Australian casino operator Crown Resorts received the AMP of AUD 450 million ($300 million) for its inability to assess and manage risky clients well. This severe penalty exacerbated some AML failures in the monitoring of the high-rolling customers, which had an undesirable impact on the casino industry’s image. The case thus confirms the challenges in the gambling industry and the required enhanced stringent compliance measures against vice activities.
Let’s take a look at some of the most significant fines to be issued this year:
A U.S. court has approved a $2.7 billion fine against Binance, the cryptocurrency exchange, and its former CEO, Changpeng Zhao, following a case brought by the U.S. Commodity Futures Trading Commission (CFTC). The court mandated a $150 million payment by Zhao and a $2.7 billion payment by Binance.
The penalties are a result of Binance’s violations of anti-money laundering and sanctions laws, failure to report suspicious transactions, and associations with entities linked to terrorism and child exploitation. Zhao stepped down in November, pleading guilty to breaking U.S. anti-money laundering laws, as part of a settlement closing a lengthy probe into the world’s largest crypto exchange.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) has fined Crown Resorts $450 million for past violations of Australian anti-money laundering legislation at its casinos in Perth and Melbourne. The financial intelligence agency acknowledged that it had underrated the threats that its casinos posed for money laundering and terrorism financing.
William Hill and its sister brand, Mr. Green, have been fined a record-high $19.2 million for failing to take care of the community and stop money laundering.
One of the worst mistakes was letting a customer open an account and spend £23,000 in 20 minutes without checking anything. Other users were able to spend £18,000 in 24 hours and £32,500 in two days, again without showing proof of income or going through AML checks.
Customers were allowed to put in large amounts of money, which they then lost, without proper checks to prevent money laundering.
Even though the Gambling Commission told companies not to take advantage of weak people during a shutdown, many of the worst cases happened during this time.
Guaranty Trust Bank UK Ltd was fined £7.6 million for having major problems with its AML processes and controls. Due diligence on high-risk clients was not performed, nor was the origin of the client’s wealth or assets investigated.
Since it was not the bank’s first time doing something wrong, the fine was made a lot bigger. But the bank hasn’t argued with the FCA’s results and has agreed to settle. This has allowed them to get a 30% discount.
A $50 million fine has been put on the Bank of Queensland (BOQ). Regulators said that BOQ had broken financial standards and not followed anti-money laundering laws.
Based on what has happened with other banks that have broken rules, the BOQ’s costs could go up as it is forced to fix its systems.
BOQ must retain $50m until it implements a corrective action plan to satisfy financial authorities AUSTRAC and APRA’s concerns, according to a separate commitment.
The FCA fined the largest Islamic bank in the United Kingdom £4 million for neglecting to conduct adequate checks on the fortunes of high-risk customers. Al Rayan Bank did not maintain up-to-date due diligence records or have adequate procedures for handling significant cash deposits.
In addition to this, there was an insufficient amount of AML training. Despite being warned of deficiencies by the Second Line of Defense, problems were not resolved.
An online gambling operator was hit with a £6.1 million punishment by the UK Gambling Commission (UKGC) for failing to adequately address social responsibility and money laundering concerns.
Although unusual play patterns and prolonged play times were reported, In Touch Games, which runs 11 online gaming platforms in the UK, did not engage with a client for seven weeks. A customer’s assertion of a monthly income of £6,000 was likewise approved without verification, despite warning signs.
It settled for £2.2m in 2019 and paid a £3.4m punishment the following year. Repeat offenders will face increasing penalties, the Gambling Commission has warned.
In November 2023, Binance, the world’s largest cryptocurrency exchange, and its CEO Changpeng Zhao (CZ) faced criminal charges from the U.S. Department of Justice (DOJ) for facilitating money laundering and violating U.S. sanctions. Binance had long been under investigation for failing to implement robust anti-money laundering (AML) protocols, allowing illicit funds to flow from countries such as Russia, Iran, and Cuba. The DOJ, along with the U.S. Commodity Futures Trading Commission (CFTC) and the Treasury Department, imposed a historic $4.3 billion fine on Binance, marking the largest corporate penalty in U.S. Treasury history.
Zhao pleaded guilty and would resign from his position of CEO and he was directed to pay a personal fine of fifty million US dollars. These shortcomings include Ineffective Know Your Customer (KYC) policy, and processing transactions related to terrorists, ransomware, and dark web platforms. Another point that the CFTC made was that the Binance employees including the Chief Compliance Officer Samuel Lim were also privy to the illegal activities but looked the other way.
After the scandal, Richard Teng stepped in as the new CEO to enhance Binance’s compliance management and regain the trust from the public in the very sensitive sector of the cryptocurrency markets. Hence, the case reflects the increasing concern of global regulators with exchanges dealing in cryptocurrencies.
The Binance case highlights the necessity of proper compliance, and clarity in the cryptographic money market since authorities are perceiving dealing platforms as important front lines in the global battle against money laundering and related crimes.
Currently, the countries with the most severe AML fines are:
Money laundering is a serious crime that poses a significant threat to financial systems worldwide. Governments and regulatory bodies have implemented AML laws and regulations to combat this threat, and authorities are cracking down on those who violate them. In recent years, several countries have been fined heavily for failing to implement adequate AML measures, resulting in billions of dollars in penalties.
The penalty for not reporting money laundering is severe and can result in huge fines or jail time. If you are found to be complicit in a money laundering offense, then you could face prosecution under the Proceeds of Crime Act 2002.
Spotting AML red flags is essential for financial institutions to spot money laundering activity. Red flags are warning signs that suggest something may need to be corrected, such as large and frequent cash or wire transfers without a valid business purpose or an unusually high volume of transactions from customers with no history of previous activity.
Other red flags of AML include customers who could be more active when asked questions about their transactions and customers with complex structures for ownership or control. It’s important to note that red flags don’t necessarily mean money laundering is occurring, but they warrant further investigation by a money laundering reporting officer.
To put it simply, businesses can avoid any kind of AML fines and penalties by adhering to the rules and regulations of AML Compliance. Here are some bits of advice:
Note that verification processes may be time-consuming and complex. That is why working with verification solution providers that can develop unique processes that maintain conversion high and compliance impermeable is more beneficial.
AML regulations are still dynamic due to new financial risks and threats, growth of technology, and due to geopolitical change as well. 2024 is going to be a year of change as new legislation and reforms that will redefine AML compliance on the international level are planned. Here, are the more important updates and changes in AML regulations that are current in the present compliance environment.
This AML/CFT legislative package of the European Union agreed on the 24th of April, 2024, includes major novelties to the regulation of combating the use of the financial system for money laundering and financing terrorism in the EU. This package has been developed to synchronize AML/CFT measures across the EU and enhance cooperation and compliance. Key changes include:
The Corporate Transparency Act (CTA) was enacted in the United States on January 1, 2024, making it a major leap in AML measures. It advised the CTA to compel organizations in the US and those originating from other countries carrying out business in the US to declare their ‘beneficial owners’ to the administration. Failure to comply attracts the possibility of fines which do not exceed $10000 besides facing up to 2 years imprisonment. It has the primary goal of reducing the number of shell corporations employed in such activities as money laundering and tax fraud.
In the UK there is Economic Crime Plan 2 (ECP2), launched in the year 2023, which is still implemented in the year 2024. It enhances the UK’s efforts to combat money laundering and economic crimes through: It enhances the UK’s efforts to combat money laundering and economic crimes through:
Australia is expected to implement its Tranche 2 reforms in 2024/2025, addressing a long-standing gap in its AML/CFT regulations. These reforms will extend AML compliance to:
The G7’s Hiroshima AI Process, introduced in 2023 and continuing into 2024, focuses on the regulation of Artificial Intelligence (AI) and its use in AML practices. Key elements include:
In response to these evolving regulations, technologies like Verify 365 are helping financial and legal firms navigate compliance challenges. This platform integrates:
Another trend evident in 2024 concerns the raised demand for a higher quality of due diligence as well as a higher level of transparency. New measures have been introduced throughout the European countries aiming better CDD and beneficial ownership information for financial entities. While in the Asia-Pacific region regulators are putting more emphasis on the increase of rigidity of procedures for cross-border transactions, Africa aspires to increase the transparency of beneficial ownership.
This process is a global one that highlights the need to obtain detailed customer information and to develop and utilize suitable AML/CFT strategies to fight money laundering and financing of terrorism. Good due diligence, accurate risk evaluations, and continuous control are the components that more and more businesses of all kinds need to adhere to. The biggest AML fines of 2024 reinforce that the industries are to remain under intensified pressure to maintain high standards most especially in the area of compliance.
We hope that this blog has helped provide information on AML fines, its penalties, and the processes involved in preventing money laundering. Remember that it is essential for financial institutions to have robust systems and controls in place to detect any suspicious activities.
Compliance with AML regulations is necessary and very important to ensure a safe and secure financial system. If you require any further information or advice, please do not hesitate to contact us at KYC. We are here to help!
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