AML and Sanctions related Major fines (exceeding US$10 million) reached US$45.679 billion for the 21st Century (2000 – end 2024). 85 AML related fines generated US$27.886 billion and 26 sanctions related cases generated US$17.793 billion.
2024 was a bumper year for the value of AML fines (US$3.3 Billion from 8 cases) whereas 2023 saw only one major fine (US$186 million).
AML related fines are also on the increase as more countries come under pressure to impose fines and for fines to be ever larger. Sanctions enforcement is up outside of the US, with the EU, UK and Switterland becoming more active.
- AML Related Fines
Whilst the results provide a total aggregate amount of US$28 billion, put into context it is likely similar to the amounts seized from financial criminals and money launderers annually.
Still more context however is that the top 1000 Banks reported profits in 2024 (before tax) of US$1.43 Trillion, with JP Morgan alone reporting US$61.6 Billion.
Large fines really started with Wachovia’s fine of US$110 Million in 2010 but this was supersized with the HSBC fine in 2012 which had been the poster child for AML fines until being knocked off an unwanted perch in 2024 by TD Bank USA.
Still depending upon the definition of what is an AML fine, if you include the fines paid by Goldman Sachs for its involvement in the 1 MDB scandal this is by far the costliest AML related incident, followed by TD Bank USA and JP Morgan’s costly pay out due it’s Madoff involvement.
In total there were 85 fines that exceeded US$10 million this century & 32 that exceeded US$100 million.
Most fines and most large fines were levied in the US, but the UK, Sweden, The Netherlands, Australia, Malaysia and Denmark also levied large fines.
Notable years for fines announced include 2012, 2014, 2018 and 2020 – 2024 (excluding 2023).
Notable years for continuing AML violations that have been punished most severely are between 2008 and 2014.
Whether fines and large fines reflect supervisory effectiveness or lack of it is an open debate and one where supervisors have different views.
2. Sanctions Related Fines:
Whilst it is Banks and FIs that have faced the largest sanctions related fines since the Millenium, paying approximately US$17.8 billion, with 99% of it to the US authorities, other industries have felt the force of law in particular US enforcement and since 2022, they have included the tobacco, technology, chemical, manufacturing and cryptocurrency industries as well as Banking. For a summary if all Bank/FI Sanctions related fines since 2000 see the updated Charts below.
In 2002, Cryptocurrency Exchange, Bittrex was fined US$24 million for sanctions and AML violations, and more serious action was taken to indict the owners of cryptocurrency mixer or tumbler service Tornado Cash, listing related persons due to the involvement in laundering proceeds of crimes for sanctioned persons including hackers from North Korea. In 2022, there were 16 US enforcement cases with fines totalling US$42.6 million.
In 2023, British American Tobacco (BAT) was fined US$508 million for supplying cigarettes to North Korea, whilst Seagate Technology was fined US$300 million for supplying hard disk drives to China’s Huawei and in the manufacturing industry, post it note owner, 3M was fined almost US$10 million for supplies of reflective licence plates to Iran. Binance was fined almost US$1 billion (US$968,618,825), which also led to the company pleading guilty to sanctions and AML violations, leading to US$4.3 billion in total fines and Binance CEO, Changpeng Zhao pleading guilty and being imprisoned in a US jail. These cases overshadow fines against Wells Fargo fined US$30 million for trade finance related transactions involving Iran, Syria and Sudan, for Swedbank fined US$3.4 million in 2023 in connection with sanctions (US) on Crimea (Ukraine Russia Sanctions) and for Nasdaq which was fined US$4 million for its foreign subsidiaries involvement with Iran. In 2023, there were 17 US enforcement cases with fines of US$1.5 billion.
In 2024, their were no really major sanctions fines, with the largest levied against SCG Plastics, for US$20 million, for supplying chemical resin used to make bottles in Iran, and in the chemical industry with Aiotec selling chemical plant parts to Iran, receiving a fine of US$14.5 million. The only Bank/FI related enforcement case with a US$7.5 million sanctions related fine in 2024 was levied at State Street for Ukraine/Russia related sanctions violations. These represented 3 of 11 US sanction cases with fines totalling just US$48.7 million in 2024.
Outside the US, the UK fined Starling Bank (A so called relatively new Challenger Bank) US$35 million (£29 million) in 2024 for poor sanctions systems and controls related to sanctions screening.
Whilst the US continues to dominate in sanctions enforcement, the UK, EU and other G7 partners are investigating many more potential sanctions violations cases, with new powers and resources and with many expecting a significant shift from 2025 onwards.
In More Detail:
1. Almost US$46 billion in fines for AML & Sanctions violations by Banks/FIs – More than 59% of AML related fines are levied by the US, whereas over 99% are levied by the US for sanctions cases (value). A handful of countries have levied large AML related fines (UK, Sweden, the Netherlands, Australia, Malaysia & Denmark). The total aggregate (AML/Sanctions) amount is almost US$46 billion which over 24 years, is on average US$1.9 billion a year. Put into context 1) The AML amount is likely similar to the amounts seized from financial criminals and money launderers annually; 2) The top 1,000 Banks reported profits in 2024 (before tax) of US$1.43 Trillion, with JP Morgan alone reporting US$61.6 Billion, so the total represents 0.13% of profits (for Top 1000 Banks) in 2024.
2. Almost US$28 billion in fines for AML violations by Banks – In total there were 85 fines that exceeded US$10 million this century & 32 that exceeded US$100 million. Most fines & most large fines were levied in the US, but the UK, Sweden, the Netherlands, Australia, Malaysia & Denmark also levied large fines. Notable years for fines announced include 2012, 2014, 2018 & 2020 – 2024 (excluding 2023). Notable years for continuing AML violations that have been punished most severely are so far between 2008 & 2014. Fines are likely to increase and proliferate as FATF R35 supports their use.
3. ABC Fines – The largest ABC case generating fines from the US, UK, Malaysia was levied on Goldman Sachs involved in the Malaysian 1MDB scandal. Other ABC related violations included JP Morgan, CS & Barclays.
4. AML Correspondent Banking Fines – Banks that operate correspondent accounts, particularly US$ accounts (in the US) have been fined for AML control violations as well as more serious allegations of laundering serious financial crime including for organised crime & drug trafficking, e.g BONY, Wachovia & HSBC. US supervisory expectations for AML controls have exceeded other financial centres for many years. Operating US$ correspondent accounts also opened many banks to liability for sanctions violations – (See 7. across). Providing US$ correspondent banking has generated almost US$6 billion in AML related fines for 22 cases & almost US$18 billion & 25 cases in sanctions related fines this century.
5. PvB Fines – Cases against Private Banks include Riggs Bank in the USA (2 cases), BSI in Switzerland, which led to their take over and or closure, as well as for Barclays PvB in the UK.
6. AML Non CBR – The largest number of cases fall into the main AML category which includes retail & corporate banking, largely as a result of weaknesses identified in main core controls such as: KYC/CDD or Transaction monitoring. In a number of cases, the failures to remediate known identified problems have been instrumental in the fine being levied. In a number of cases serious underlying ML was a main factor in high fines being levied, e.g, for Wachovia, HSBC and TD Bank USA, all being connected to LATAM drug trafficking – organised crime money laundering, for BONY & Danske Bank for money laundering of Russian illicit funds via & Nat West for laundering drug proceeds in the UK. These cases emerged out of law enforcement investigations and led in a number of cases to criminal convictions, with the remainder the subject of civil actions by supervisors.
6. AML Non CBR – The largest number of cases fall into the main AML category which includes retail & corporate banking, largely as a result of weaknesses identified in main core controls such as: KYC/CDD or Transaction monitoring. In a number of cases, the failures to remediate known identified problems have been instrumental in the fine being levied. In a number of cases serious underlying ML was a main factor in high fines being levied, e.g, for Wachovia, HSBC and TD Bank USA, all being connected to LATAM drug trafficking – organised crime money laundering, for BONY & Danske Bank for money laundering of Russian illicit funds via & Nat West for laundering drug proceeds in the UK. These cases emerged out of law enforcement investigations and led in a number of cases to criminal convictions, with the remainder the subject of civil actions by supervisors.
7. AML Fraud – Cases brought against Banks for allowing frauds, e.g. Ponzi schemes using their systems are rare, but JP Morgan’s relationship with Madoff cost it US$2.6 billion in 2014, (US$1.7 billion of it paid to victims). Other notable cases that facilitated fraud, through poor AML controls are First Bank of Delaware & TD Bank USA.
8. AML Markets – Market participants rarely receive large AML fines but this changed in 2017. Deutsche Bank was fined in the US & UK US$630 million for its role in wash trading from Russia. Other fines were against CS, UBS & Morgan Stanley
9. Almost US$18 billion in fines for Sanctions violations by Banks – Banks have faced the largest sanctions related fines since the Millennium, paying approximately US$17.7 billion (17 =>US$100 million & 26 over US$10 million), with 99% of it to the US authorities. Other industries have begun to feel the force of law in particular from US enforcement & since 2022, they have included the tobacco, technology, chemical, manufacturing & cryptocurrency industries as well as Banking and are more likely to see continued fines & penalties this decade as financial sanctions are supplemented by trade and other sanctions.
The Effect of using Sanctioning Powers including Fines
FATF Recommendation 35: “Countries should ensure that there is a range of effective, proportionate and dissuasive sanctions, whether criminal, civil or administrative, available to deal with natural or legal persons covered by Recommendations 6, and 8 to 23, that fail to comply with AML/CFT requirements. Sanctions should be applicable not only to financial institutions and DNFBPs, but also to their directors and senior management”.
AML Fines Effectiveness: Since 2020, US$27.9 billion in fines have been levied (>50% % by the US, but also by the UK, the Netherlands, Australia, Malaysia, Denmark and Sweden). Whilst large fines have not been seen elsewhere an increase in the number of AML related fines has, including in Singapore, Canada, Germany, UAE. Switzerland, Hong Kong and Japan. Larger and or more frequent fines reflect an increased supervisory apetite for increasing the tariff for AML violations. Evidence is not compelling that these fines are effective proportionate or dissuasive, with both repeat and new offenders found in violation of similar AML requirements. The increased incidence of AML related fines may also reflect FATF assessors preferences. With the volume and value of ML activity showing no signs of being reduced, their will continue to be cases where violations are likely and fines continue to be levied. With profits rising significantly across the Banking sector in 2024, levels of AML related fines are unlikely to be seen as dissuasive, but the costs of remediation, the reputation risks & other burdens, e.g. capital costs and or business restrictions may have more impact (see below).
Alternatives: Fines are often a last resort used by Supervisors for serious & or repeat violations. Alternatives that may encourage better compliance & or ML risk management are the use of capital controls & or business restrictions which impact the growth & or risk profile of the Bank. Targeting individuals & compensation can also be effective.
Sanction Fines Effectiveness: Since 2000, US$17.8 billion in fines have been levied (99% by the US), which has used the importance of US$ in international trade and it’s extra territorial legal approach to penalise largely foreign Banks into fully complying with US Sanctions as if they were US Banks. The use of fines and the potential for limiting access to US$ market has been effective in both improving sanctions compliance and in extending US sanctions far beyond the US. On the back of this US success, other sanctions programmes have also benefited including the UK and the EU which most international Banks apply along with the US and the UN sanctions on a global basis. Whilst the levying of large sanctions by US authorities has been effective, it is likely that the other G7 countries and the EU will step up enforcement to new levels, though Bank compliance with domestic programmes should be well established and therefore the focus may be more on compliance with sanctions by other industries or on new pseudo financial products like cryptocurrency etc, and or or trade products, where sanctions circumvention is most likely. Sanction Fines Effectiveness: Since 2000, US$17.8 billion in fines have been levied (99% by the US), which has used the importance of US$ in international trade and it’s extra territorial legal approach to penalise largely foreign Banks into fully complying with US Sanctions as if they were US Banks. The use of fines and the potential for limiting access to US$ market has been effective in both improving sanctions compliance and in extending US sanctions far beyond the US. On the back of this US success, other sanctions programmes have also benefited including the UK and the EU which most international Banks apply along with the US and the UN sanctions on a global basis. Whilst the levying of large sanctions by US authorities has been effective, it is likely that the other G7 countries and the EU will step up enforcement to new levels, though Bank compliance with domestic programmes should be well established and therefore the focus may be more on compliance with sanctions by other industries or on new pseudo financial products like cryptocurrency etc, and or or trade products, where sanctions circumvention is most likely.
Alternatives: Fines are often a first resort used by US Supervisors for sanctions violations, with a strict liability approach taken, albeit the amount of fine varies depending on numerous aggregating or mitigating factors. Others like the EU are expected to take a more proportionate approach and to base action on levels of intent or negligence involved.
Final Remarks
With almost a quarter of a century of data on fines for Banks & FIs, there are no straightforward conclusions as the data can only tell so much and can support both an argument that Banks probably need to do more and at the same time it’s only some Banks at some times (albeit many of the so called leaders in the industry) that have been found wanting and or that supervisors are active in using effective proportionate and dissuasive sanctions or that they have allowed major violations to happen on their watch, including by national champions.
AML related fines on Banks are inevitable based in the system we have and are mostly deserved per se, but they haven’t worked as expected as those truly accountable for the environment of non compliance as opposed to the acts themselves usually if not always escape real sanction, beyond at worst losing their jobs, which doesn’t create a deterrent effect across the industry.
AML related fines are also on the increase as more countries come under pressure to impose fines and for fines to be ever larger. Whilst the responsibility for violations remains primarily with the relevant Bank or FI, there does appear to be cases also of supervisory neglect. This is troubling because the Banks are probably the best supervised regulated sector.
That said sanction related fines have been much more effective as the penalty isn’t the fine but is access to the US$ clearing system, seen as a precondition to business for many.
The process, the amounts levied and the public summaries released on cases could be substantially improved, and would benefit from genuine due process and proportionality, which if you have been through one or more of these you know is often missing, but the more important issue is their effectiveness.
There may be better approaches, focusing on individuals, on recovering financial benefits and on business restrictions.
What isn’t publicly available, is the other side of the ledger, which shows how much Banks & FIs have contributed positively, which have prevented significant ML and or supported sanctions programmes and have detected and reported a lot of it and what actions have been taken based on this information to stop for example, terrorist attacks and take down serious and organised crime involved in many harmful financial related crimes, or exclude sanctions persons from regulated spaces.
This information exists, it is in the ether, is collectible but is at best occasionally held informally by Government Agencies, Financial Intelligence Units and or Law Enforcement but is rarely summarised or is positively lauded and rarely requested or reviewed and or credited by supervisors. Also not available is data on unintended consequences including de-risking affecting financial exclusion.
Having this data would help to balance the narrative that more and bigger fines are needed.
At least for AML there is little evidence that large fines have had the desired effect.
cREDIT: thefinancialcrimenews.com
