20 - Punishing AML/CFT failures or raising government funds?

Summary

AML/CFT supervision for profit.

The authors

Today there is little opportunity to ignore the policies, ideas, behaviours, software solutions and the rigorous AML/CFT compliance ‘tick-boxes’ which exist to fight money laundering. Most of this effort is governed by the FATF. Punishments, some would argue, are critical to all this effort; they act as a consequence for poor attitude and behaviour. Yet it is difficult to now find a major financial institution that has not breached money laundering regulations somewhere in the world.

Danske Bank and Nordea in Denmark, HSBC and Standard Chartered in the UK, Deutsche Bank and UBS, Credit Suisse, and HSBC North America – along with many more – have all had to answer to offences relating to AML/CFT compliance failures. A report in 2021 by consulting firm Kroll found fines for AML failings by regulated institutions were five times higher in 2020 than 2019, totalling USD$2.2 billion. Widespread media coverage has ensured we all know this, as well as how Europe has now overtaken the US and Asia in terms of enforcement. More than half of the fines in 2021 came from the Netherlands. This was of course due to Dutch lender ABN Amro, which reached a €480 million settlement with prosecutors after being accused of violating AML laws ‘for a number of years and on a structural basis’. You could think these businesses are simply not learning from their own mistakes and those of others. Do they perhaps no longer consider AML/CFT compliance a worthwhile exercise?

Whatever the reason for the failures, what seemingly follows the slap on the wrist is the generic statement incorporating responses such as ‘we are taking our legal obligations very seriously’, ‘we have now worked hard to build a robust compliance programme’ and ‘we are fully committed to undertaking our obligations’. Whether genuine or not, the punishments seem only to be increasing in value as time passes by. All the while the customer continues to pay. The idea of being sorry has, perhaps, become meaningless. All too often the corporate memory simply defaults to bygone activities.

It is at this point, the authors take caution with what we say, but the reasons why these failures happen suggest why the war on dirty money has so far been lost. The lack of interest or knowledge, ignorance and perhaps even wilful blindness?