Fenergo, the leading provider of digital solutions for know your customer (KYC), transaction monitoring and client lifecycle management (CLM), released its half-year annual findings on global financial institution enforcement actions, revealing a 31% surge in the value of fines issued in H1 2024 compared to H1 2023. Asia-pacific firms saw the biggest rise in penalties imposed, totalling over $46m – a 266% increase compared with H1 of 2023.

Global financial regulators levied 80 fines in the first half of 2024, totaling $263,252,003 for non-compliance with anti-money laundering (AML) regulations, including know your customer (KYC), as well as sanctions, suspicious activity reports (SARs), and transaction monitoring violations. In the same period last year, regulators issued over $201m in penalties for the same types of violations. The findings – which relate to enforcement actions spanning EMEA, North America and Asia Pacific – indicate a multi-year trend of increasing fines, as watchdogs continue to crackdown on illicit behaviour across the globe.

The highest value fine in 2024 thus far, at $65m, was issued to the US subsidiary of a Canadian bank following unsafe practices related to operational, compliance, and strategic risk management controls. The bank was ordered to pay the fine to resolve investigations by The Office of the Comptroller of the Currency (OCC), an independent bureau of the US Department of the Treasury.

The most significant increase in enforcement action values relate to AML which increased by 87% to $113.2 million while penalties specifically for transaction monitoring, and SAR breaches, increased to a staggering $30.5m over the last six months, up from $6m. Following a similar trajectory, fines for breaches of regulations related to politically exposed persons (PEPs) came in at $26 million and KYC fines increased by 102% reaching a record high of $51m in H1 2024. In terms of sectors, banks were on the receiving end of the most stringent enforcement actions at $136 million followed by digital asset providers ($49.3m), payments firms ($40m) and private banks ($32.1 m).

Historically, the second half of the calendar year has seen an uptick in enforcement actions, with financial institutions often looking to quickly settle their fines with regulators ahead of year-end reporting.

Tracy Moore, Director of Regulatory Affairs at Fenergo, commented, “The rise in global enforcement action values reflects a strong regulatory crackdown and advancements in technology that enhance the accuracy and speed of detecting illicit activities by compliance teams.”

Moore added, “Looking towards the second half of the year, we expect this trend to continue, necessitating robust preparations for increased year-end enforcement actions. The surge in penalties highlights the urgent need for financial institutions to strengthen their KYC and AML processes, which are crucial for effective risk management, not merely regulatory compliance. Beyond financial consequences, these penalties also introduce the risk of reputational damage, potentially affecting investor trust, share prices and the bottom line. It is imperative that financial institutions intensify their monitoring and mitigation strategies to better combat financial crime.”

Source: Fenergo