Looking Back at AML Penalties Doubling in 2020: What it meant and where did the failures lie?

Non-compliance continues unchecked in global finance. If we take ourselves back to 2020, as observed by Encompass, AML penalties doubled in 2019 from their 2018 level. There was some encouragement in the figures, given that penalties among banks had reduced at this point, but it also highlighted that AML/ATF diligence isn't just a job for the financial institutions. Indeed, five fines in the gaming and gambling sector demonstrate that regulatory diligence tightened on a far broader front.

Thirty-seven of the fifty-eight penalties originated in the US and UK, totalling $2.29 billion and $388.4 million respectively. This wasn’t a suggestion that money-laundering is more prevalent in these jurisdictions; rather it highlighted that their more transparent processes and advanced regulatory oversight increased detection. As 5AMLD - the fifth Anti-Money-Laundering Directive, which came into force on 10th January 2020, began to bite, we were right to expect to see penalties continue to increase. Anecdotal evidence suggested that 4AMLD was still not fully implemented in many organisations.

Next-gen KYC and KYCC are still becoming increasingly available, and there's no question that automated due diligence can greatly ease the financial and time burden of due diligence, but is it a complete answer? The figures revealed by Encompass are interesting, but they don't tell the whole story. To me, the question these numbers pose is, were these failures in detection or process? In other words, did the organisations fail to detect the compliance problems, or did they fail to react appropriately? I have a suspicion that the latter may be disturbingly common.

What's your view?