Barring one standout penalty, it was a quiet year on the AML fines front. We unpack the largest fines of 2022 and explain how these could have been avoided.
After some hefty fines were handed out in 2021, it was a comparatively subdued year. However, there's still cause for concern with millions in AML fines issued.
The causes of these penalties range from a lack of due diligence to criminal conduct. In each case, the offenders fail to show regulators that they took reasonable steps to prevent money laundering, which results in a financial penalty.
We track these fines on an ongoing basis; find out more in our posts about the biggest AML fines of 2020 and the biggest AML fines of 2021.
The FCA issued Santander a fine of almost £108m for AML failures in its business bank division. Upon investigation, the FCA found that the UK division of the bank had failed to maintain its anti-money laundering systems adequately which affected how it dealt with 560k customers.
From 2012 to 2017, the bank's systems couldn't properly verify the information that customers provided regarding their businesses. Since Santander did not dispute the regulator's findings, the bank qualified for a 30% discount on the fine.
“Santander’s poor management of their anti-money laundering systems and their inadequate attempts to address the problems created a prolonged and severe risk of money laundering and financial crime.”
Mark Steward, enforcement and market oversight, FCA
An online gambling business that operates 78 websites, 888 UK Limited, has been ordered to pay a £9.4 million fine issued by the UK Gambling Commission.
The company's failings include failure to identify players at risk of harm, failure to implement the Gambling Commission's formal guidance on customer interaction and allowing customers to gamble with large amounts of money without carrying adequate due diligence and Source of Funds checks.
"[The] fine is one of our largest to date, and all should be clear that if there is a repeat of the failures at 888, then we have to seriously consider the suitability of the operators to uphold the licensing objectives and keep gambling safe and crime-free."
Andrew Rhodes, the Gambling Commission Chief Executive
The FCA has fined Ghana International Bank (GHIB) £5.8m for failings in anti-money laundering controls. The main reason for the fine was the bank's practice of providing correspondent banking services to other lenders, which enabled them to provide products and payment services they would otherwise be unable to.
Authorities found the bank unable to identify and assess risks posed by its correspondent bank customers. Furthermore, they failed to properly scrutinise transactions worth £9.5bn processed on their behalf.
According to the FCA, "No evidence of actual money laundering was detected, though the risk of money laundering as a result of these deficient systems was significant," adding that GHIB has agreed to an early settlement and not to dispute the findings.
A multimillionaire Azerbaijani politician and his family have to turn over millions in suspicious funds brought into the UK through a complex money-laundering scheme known as the "Azerbaijani laundromat."
After ruling that the funds "arise from criminal conduct" and "money laundering," a judge ordered Javanshir Feyziyev and his relatives to forfeit £5.63 million held in various bank accounts.
In 2017, this grand scheme was exposed after the Danish newspaper Berlingske, and numerous other media partners received leaked secret bank records. The data showed that the Azerbaijani leadership had made over 16,000 private transactions between 2012 and 2014. These transactions were worth approximately $3m a day.
"This is a substantial forfeiture of money laundered through the Azerbaijan laundromat, and our success highlights the risk to anyone who uses these schemes. We could recover these millions without proving the exact nature of the original criminal activity. We will continue to use civil powers to target money entering the UK via illegitimate means."
Andy Lewis, head of civil recovery at the National Crime Agency (NCA)
The FCA has fined a family office broking company, TJM Partnership, £2m for failing to ensure it had effective systems and controls in place to identify the risk of financial crime in its business.
TJM has also been charged with engaging in illegal trading on behalf of clients of Bermuda-based Solo Group to facilitate the organisation of withholding tax claims in Denmark and Belgium.
According to reports, TJM, formerly Neovision Global Capital, earned £1.4m in commission from the cum-dividend trades it made on £59bn worth of Danish stocks and £20bn worth of Belgian stocks.
AFM, the financial regulator in the Netherlands, has issued a €2m fine to Robeco for failing to check its clients for money laundering sufficiently.
It is a requirement for Dutch financial institutions to report suspected transactions to the Financial Intelligence Unit (FIU). However, Robeco along with its subsidiaries reported only a few such transactions when compared with other firms.
Only two out of Robeco's over 250,000 clients, only two clients had received the risk classification "provisionally unacceptable". These clients opened their accounts in 1986 and 1994.
This raised suspicion with the regulator, AFM. Upon investigation, they found significant shortcomings in the company's client checks and transactions.
The Central Bank of Ireland fined Danske Bank €1.82m for transaction monitoring failures in its AML and terrorist financing systems. Between 2010 and 2019, the bank failed to ensure that its automated transaction monitoring system monitored the transactions of certain customer groups in the Dublin branch.
As a result of this failure, specific customer groups were excluded from the transaction monitoring process. This included some customers that are categorised by the bank as medium and high risk.
HM Revenue and Customs (HMRC) published a list of businesses that have failed to comply with AML regulations. A total of 68 estate agents have been found in breach of money laundering regulations over the period between January 2022 to March 2022. The named estate agents have been fined an amount totalling over £500k.
There has been a call to improve standards in the sector with a continued pattern of non-compliance among estate agents.
"We are determined to create a level playing field for businesses who play by the rules. That means taking action against the minority of businesses who fail to fulfil their legal responsibilities under the money laundering regulations."- Nick Sharp, HMRC’s deputy director of economic crime
The investment company, Southern Cross SICAV plc, has been handed a hefty fine by the Financial Intelligence Analysis Unit (FIAU). This penalty was issued for numerous anti-money laundering failures that resulted in millions invested without robust controls.
South Cross SICAV plc's shortcomings include four breaches of the Prevention of Money Laundering and Funding of Terrorism Regulations. In addition, the investigation found that the company failed to have adequate measures in place to obtain the source of wealth (SoW) and the expected source of customer funds.
Another finding was that on three occasions, the company decided to invest its own funds in its customers' business. These investments took the form of payments of about €1 million to each of the investors and issuing units in fund.
"In view of this, there was no clear rationale as to why the company was investing in the business of its customers and whether this was in line with the prospectus and the customary business of the company,”
The FIAU
XNT Ltd, a financial services company, has been fined an administrative penalty of €244,679 by the FIAU. The penalty was issued for several reasons - the first of which relates to customer due diligence.
Upon investigation, the regulator found that the company failed to fulfil its obligations to assess and obtain information for the business relationship. Furthermore, XNT Ltd had some issues with their policies and procedures as they did not meet the requirements to screen customers.
In addition to these issues, the company's transactions did not include supporting documentation, and there were concerns highlighted with the company's MLRO as they displayed a lack of understanding of the company's policies and controls.
There are no definitive trends in AML fines imposed in 2022. However, the overall number of fines may increase due to continued regulatory scrutiny in the wake of high-profile money laundering cases.
Additionally, the average size of AML fines is expected to increase as financial institutions become more aware of the risks associated with money laundering and take steps to improve their compliance programs.
The top 5 countries with the most AML fines in 2022 are:
The United States has been the country with the most AML fines in recent years, and this is likely to continue in 2022. However, the UK is a close second.
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