Financial regulators around the world imposed significantly more fines on banks in the first half of the year for shortcomings in money laundering prevention. At a total of 263 million dollars, they were almost a third higher than in the same period last year, Irish fintech Fenergo said recently. It provides services in regulatory and compliance, as well as anti-money laundering.

In Germany, the fines rose significantly. Institutions had to pay the equivalent of more than 18 million dollars at the behest of BaFin, after a meagre 200,000 dollars in the first half of 2023. The most significant part was attributable to three institutions. N26 had to shell out 9.2 million euros because, according to the financial regulator, it had „systematically“ submitted suspected money laundering reports late in 2022. It was not the first time. In mid-2021, BaFin had already imposed a fine on N26 for a high number of late suspicious transaction reports. At that time, 4.25 million euros had to be paid.

For the same reason, Solaris was fined 6.5 million euros. Commerzbank had to pay 1.45 million euros because anti-money laundering regulations had been violated during the merger with the online subsidiary Comdirect Bank in 2020. For example, customer data had not been updated on time or sufficiently, and internal security measures had shown deficiencies.

According to Rory Doyle, Head of Financial Crime Policy at Fenergo, the planned Federal Financial Crime Authority (BBF) is already casting its shadow in this country. The office, whose launch has been repeatedly postponed, is intended to pool resources in the fight against money laundering and sanction avoidance, and make them more effective. According to Doyle, the impending establishment of the BBF is likely to have an impact on the anti-money laundering enforcement system, leading to stricter monitoring and higher fines.

„This reflects the general trend towards more control and stricter enforcement to combat money laundering and terrorist financing in the EU,“ Doyle told Börsen-Zeitung. For example, the EU Anti-Money Laundering Authority (AMLA) will be based in Frankfurt and will start work next year. In addition, the stricter approach of the supervisory authorities in Germany and worldwide can be explained by an increased awareness of the risks of financial crime, explains Doyle - „especially in light of publicly known scandals and global efforts to increase transparency.“

All in all, 80 fines were incurred globally in the first half of the year for violations of customer identification requirements (Know your Customer, KYC), sanctions regulations and transaction monitoring regulations, according to Fenergo. The highest individual fine of 65 million dollars was imposed on the US subsidiary of a Canadian bank. According to the US regulators, City National Bank in Los Angeles had at times not taken risk management and internal controls, including in relation to money laundering, very seriously.

According to Fenergo, the most significant increase was in fines imposed worldwide for violations of money laundering regulations (+87%), particularly in transaction monitoring (+408%). For the first time, fines were also imposed for violations of regulations on politically exposed persons (PEPs). Important decision-makers are referred to as such, be they heads of state and government, ministers, high-ranking military officers or judges. Because of their prominent position and the particular risk, banks have to observe stricter due diligence obligations towards them.

Doyle assumes that the regulators will maintain the pressure. „Given the increasingly sophisticated technologies and monitoring procedures used by regulators to detect misconduct, it seems unlikely that the sharp increase in enforcement actions will abate in the second half of the year," he says.