• Ian Henderson, CEO at Kyckr


• 06.06.2023 10:30 am
#aml

Last year saw a significant drop in anti-money laundering fines that were handed out compared to previous years, showing signs that financial and banking institutions are improving their compliance actions. 

However, widespread reliance on outdated technology and manual processes still remains a significant regulatory risk. 

Throughout 2022 the team at Kyckr tracked and collected information on anti-money laundering (AML) bank fines that were publicly announced by enforcement agencies worldwide in 2022. We looked at both the banks that were fined for AML compliance violations as well as the compliance failures that resulted in the penalty. 

The report revealed that in 2022, global financial institutions were fined over US$3,334,839,425.00 for AML compliance breaches. However, a hefty Q4 fine issued to one large global bank amounting to US$2,150,000,000 – or 64% of the total – means that it does not accurately reflect the drop in penalties. 

While the drop in fines handed out in 2022 demonstrates how a more efficient onboarding process and stricter regulations are finally having an impact on financial institutions across the globe, we still see some non-compliance, sanction breaches, handling criminal funds, and negligence. 

This comes down to issues with legacy technology, a lack of automation, decaying data, and the inability to effectively identify the ultimate beneficiary owner. These issues still need to be addressed if we are to see a continual decline in the number of AML fines being handed out. 

And yes, while stricter regulations have resulted in an improvement in customer onboarding, the focus will now move to Perpetual KYC – automated continuous monitoring, rather than relying on periodic and manual solutions. 

Banks and financial institutions will need to cut out costly and time-consuming manual processes prone to human error and leverage the automated best-of-breed technology available to them. 

As the global marketplace becomes ever more interconnected and complex, regulated firms and businesses need to shore up their AML and KYC processes to avoid significant future fines; not to mention doing their bit to prevent financial crime. 

With more than $1bn collected by regulatory bodies in fines in 2022, according to data collected by Kyckr, (that sum is $3bn if the penalty against the large global bank fine is included), it’s clear that although there has been a big improvement, even if staying on the right side of AML compliance remains a challenge for financial institutions around the world. 

Due diligence failures are the root cause of a substantial amount of the pain and penalties incurred by these institutions, and many could have been prevented with real-time corporate Know Your Customer (KYC) technology. 

As the focus moves from onboarding to Perpetual KYC, banks and financial institutions will need to move away from slow and expensive manual processes and embrace more efficient and hyperautomated ways of working, in order to avoid financial penalties going forward.