Watchdogs Hit Money Launderers With Record Fines

There was a dramatic increase in money laundering fines in 2020 as financial crimes boomed during the coronavirus pandemic.

Authorities handed out $2.2 billion in fines last year, five times larger than 2019’s total, according to a report from Kroll, a risk consultancy.

Financial firms were given the largest fines for failures in anti-money laundering (AML) and suspicious activity monitoring. “The tolerance level for AML failings is seriously reducing and as a result we think fines are going up to reflect that,” says Claire Simm, managing director of financial services compliance at Kroll.

Australia doled out the largest fines in 2020. Its Westpac bank was hit with a record A$1.3 billion ($940 million) following an investigation into money laundering and child exploitation. In September, investigators found that the Australian bank had breached AML laws after customers transferred money to the Philippines in a way consistent with child exploitation.

After Australia, Sweden was the next largest target for money laundering after Swedbank was hit with a $386 million fine for not performing AML checks on its mainly Russian customers of the bank’s Estonia branch.

The U.S. was the fourth largest country for money laundering fines in 2020, after Hong Kong.

However, it is the countries that have not slapped money laundering fines on their financial firms that are the biggest concern, says Maira Martini, a policy expert on corrupt money flows at Transparency International. Neither Switzerland nor the UAE was mentioned in the report, despite serious suspicions of money laundering in both countries.

Last month, Switzerland closed a 10-year investigation into a suspected $230 million of laundered Russian tax funds without a single prosecution.

And last week, Dubai announced a special court focused on combating money laundering in an attempt to “strengthen the integrity of the financial system,” The emirate’s media office said. In January of this year alone the UAE handed out $12 million worth of fines to banks breaching anti-money laundering laws.

But authorities everywhere need to do more. Most cases of serious money laundering are unearthed by activists, whistle-blowers and the media. “It is quite worrying that it’s not authorities that are the ones finding out that there are problems,” says Martini.

This shows “the system is not really working” she says. “It’s very serious that authorities only realize there’s an issue with these things when there’s a scandal.”

The Impact Of Covid On Money Laundering

While the fines for money laundering have increased during Covid-19, the impact of the pandemic on financial crimes is not yet known. Investigations take months, even years, so many allegations of money laundering that were made in 2020 and 2021 are yet to be concluded.

Many of these investigations concern new financial and tech firms, whose businesses have grown so rapidly in recent years that regulators have struggled to keep up.

Last month, Monzo, one of the U.K.’s largest fintechs, revealed that it was being investigated by the Financial Conduct Authority (FCA) over potential breach of AML laws. N26, a German fintech, has also been investigated for failures in AML controls.

Binance Markets, a cryptocurrency exchange, is also being investigated by the FCA amid concerns about money laundering. It has already warned British consumers against using the platform.

“It will be interesting to see in the next 12 to 18 months what the impact of Covid really will be,” says Simms. Already 2021 is on track to “be at the same level if not higher than last year.”

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