As we discussed in the first blog of this series, global financial services firms need to deal with different regulatory regimes has typically led to a local focus on anti-money laundering (AML) compliance and, in turn, higher costs for compliance as each jurisdiction required customized AML policies, standards and processes. Additionally, recent enforcement actions by national regulators have imposed severe penalties for non-compliance.

In the US, for example, the Federal Reserve Board issued 11 percent fewer enforcement actions for AML infractions in 2014 than it did in 2013.  However, the banks paid seven times the fines levied in the previous year, a total of $351 million,1 and it has been noted that regulators appear to have increasingly high expectations for banks regarding their Know Your Customer (KYC) and AML policies and tools.2

As the law firm of Sullivan & Cromwell LLP noted, “The year 2014 was marked by record-setting fines and precedent-setting criminal prosecutions and enforcement actions against financial institutions for violations of BSA/AML and sanctions laws.  In addition, individuals faced personal liability and public accountability for their actions and for compliance-related deficiencies within their areas of responsibility.”3

The research firm Research and Markets now estimates global spending on AML activities to grow to more than $8 billion by 2017, equating to a compound annual growth rate of almost nine percent over the forecast period.4

Clearly, the stakes involved in AML compliance are high, not just in terms of cost but in terms of potential reputational and financial damage to affected firms.  In the next post in this series we will look at some of the regional variations in how AML risk is monitored and managed.

For more information, view our presentation on the need for a global consistent standard for anti-money laundering compliance.

 

References:

  1. “Regulators Issued Fewer AML Fines in 2014, But Packed a Bigger Punch,” Kaufman Rossin Fund Services, February 24, 2015: https://krfs.com/news/regulators-issued-fewer-aml-fines-in-2014-but-packed-a-bigger-punch/
  1. “Taking the Next Step in KYC and AML Compliance,” InformationWeek Bank Systems & Technology, March 5, 2014: http://www.banktech.com/compliance/taking-the-next-step-in-kyc-and-aml-compliance/d/d-id/1296879
  1. “2014 Year-End Review of U.S. BSA/AML and Sanctions Developments and Their Importance to Financial Institutions,” Sullivan & Cromwell LLP, January 29, 2015. Access at: https://www.sullcrom.com/siteFiles/Publications/SC_Publication_2014_Year_End_Review_of_US_BSA_AML_and_Sanctions_Developments.pdf
  1. “Spending on AML operations ‘to surpass $8bn’,” Bureau Van DIJK, April 9, 2014. Access at: http://www.bvdinfo.com/en-gb/blog/compliance-and-due-diligence/spending-on-aml-operations-to-surpass-$8bn

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