Money laundering and other financial crime fines handed out to banks and FI’s have peaked at more than 50% of last years total, demonstrating that the penalties are simply failing to deter the behaviour and systems flaws that allow criminals to channel money through the global financial system.
Banks and other financial institutions were fined almost $5 billion for “anti-money laundering” infractions, breaching sanctions and failings in their “know your customer” systems in 2022, bringing the total since the global financial crisis to almost $55 billion.
Fines typically come several years after infractions, so the latest figures do not capture financial institutions caught out by the heavy use of sanctions introduced in the wake of Russia’s assault on Ukraine.
The 2022 surge marks a rebound from a fall the previous year, raising questions over the effectiveness of a global crackdown on financial crime in the wake of the 2008 crisis, when authorities started issuing large fines in an effort to compel beleaguered banks to do more to protect the financial system from criminal misuse.
“There’s a lot of evidence, particularly in the UK and the US, in terms of repeat offending by the big firms after they’ve been fined for things,” said Huw McCartney, a professor at the University of Birmingham and co-author of a 2019 study of the impact of post-crisis fines on the Anglo-American banking markets.
McCartney said that in the wake of fines, companies usually put more resources into compliance and monitoring but remediations could be “quite poorly enforced and monitored both within the firm and by the regulators themselves”.
The US has been the most aggressive imposer of penalties, chalking up $37 billion of the fines, followed by roughly $11 billion in Europe, the Middle East and Africa, and just over $5.1 billion in Asia-Pacific, according to the Fenergo data.
Dennis Kelleher, chief executive of Washington-based financial reform advocacy group Better Markets, is also sceptical of the effectiveness of fines in cleaning up the financial system.
“No matter how big the fines are they don’t punish and they don’t deter,” he said, adding that the penalties are “mostly a meaningless cost of doing business. No matter how big they are they are small compared to the revenue and profits of the banks.”
BNP Paribas, UBS, Goldman Sachs, JPMorgan Chase, HSBC and Standard Chartered top the league table for AML and related fines in the post-crisis era.