Report: 2022 Saw 50% Spike in Money Laundering Fines

Penalties for failing to stop financial crimes jumped by more than 50% last year.

That’s according to a Thursday (Jan. 19) report by the Financial Times (FT), which says the spike has led to warnings that these fines aren’t stopping the flaws in the system that have allowed criminals to funnel money into banks and other financial institutions (FIs).

FIs were fined nearly $5 billion for anti-money laundering (AML) violations, breaches of sanctions and flaws in know-your-customer (KYC) systems last year, the report said, citing figures from compliance firm Fenergo.

Fines had been down in 2021, which the FT report argues raises questions about the efficacy of the post-2008 crackdown on global financial crime.

“There’s a lot of evidence, particularly in the U.K. and the U.S., in terms of recidivism . . . repeat offending by the big firms after they’ve been fined for things,” Huw McCartney, a University of Birmingham professor who has written about the impact of post-crisis fines on the Anglo-American banking sector, told the FT.

He noted that after being fined, companies typically invest more in compliance and monitoring. However, remediations could be “quite poorly enforced and monitored both within the firm and by the regulators themselves.”

As PYMNTS wrote late last year, 2022 saw a number of headlines and thefts that showcase “how creative bad actors have become, how they’ve fine-tuned their scams and schemes to follow the money and take it away from innocent victims — individuals, families and businesses among them.”

In an indication of the pervasiveness of financial crime last year, the U.K.’s Financial Conduct Authority (FCA) said in late December it has issued more than 1,800 warnings about potential scam firms by that point in 2022, 400 more than in 2021.

Meanwhile, the report “The State of Fraud and Financial Crime in the U.S.,” a collaboration by PYMNTS and Featurespace, showed that 62% of large banks saw increases in financial crime, with the average cost of digital payments misuse for FIs topping $120 million.

That study also showed that FIs say they aren’t taking the threat lightly. The research found that 95% of anti-money laundering (AML) executives considered it a top priority to use innovative solutions to enhance fraud detection and AML compliance, such as machine learning, artificial intelligence (AI) and cloud-based platforms.

And nearly half the respondents said they are using new technology controls. Of the firms employing these technologies, 50% are upping their use of real-time decisioning and alerts.