Fines for financial misconduct fall from post-crisis highs

For years, the only way was up for fines levied by financial regulators and enforcement agents pursuing everything from money laundering to sanctions breaches, fraud, bribery and corruption. But now the tide is turning, new data from industry monitor AML Intelligence shows.

In the first nine months of 2021, total fines and penalties for financial misdeeds across the world were 63 per cent lower than the amount levied in the same period in 2020. That’s the first time October has been reached with year-to-date fines running below their previous level since at least 2017, when AML Intelligence began collecting the data.

“Financial penalties have certainly fizzled in intensity this year,” said AML Intelligence managing director James Treacy. “2019 and 2020 have seen some record-breaking fines handed down to companies, but so far that scale has not been matched.”

Although global fines are falling, the year-to-date tally for 2021 still came in at a whopping €5.8bn for the nine months, more than four times the level of fines recorded in the same period in 2017. And while the value of fines has fallen, their number has not — there were more than 170 fines in the first nine months of 2021 versus around 120 a year earlier.

Arwen Handley, a London-based lawyer at Hogan Lovells who advises banks on enforcement, says the lack of “blockbuster” fines this year was partly responsible for trends in the UK. “There was nothing like Libor or FX or anything like that,” she says, referencing two big mis-selling scandals that resulted in tens of billions of fines around the world.

Last year was particularly high globally for fines as it included some bumper settlements, including the billions Goldman Sachs was ordered to pay for violating anti-bribery rules and other infractions related to its sale of $6.5bn of debt for Malaysia’s 1MDB development fund.

Handley also believes there was something of a “hiatus” in enforcement during the pandemic. “When lockdown first hit, there was a noticeable slowing down in the progress that was made in cases, and some cases just stopped,” she said.

Chart showing the change in bank fines from 2020 to 2021

While fines globally have not matched last year’s high, they still remain big in the US, which accounted for around €4bn of the €5.8bn fines worldwide in the first nine months of 2021.

“The United States truly is the global police officer,” said Treacy. “Its agencies like Ofac, the Department of Justice and FinCEN are leading the charge not only against domestic institutions but foreign ones too.”

Fraud, corruption and bribery was the biggest category for monetary punishment in the US, accounting for almost 90 per cent of total fines. The biggest ticket in that group was a $2.5bn fine against aircraft manufacturer Boeing for conspiring to defraud aviation regulators about the safety of its Boeing 737 Max plane ahead of two major crashes.

In Europe, AML breaches were the dominant category in Europe for the first nine months of 2021, accounting for close to two-thirds of total fines and penalties. Since then, high street bank NatWest has pleaded guilty to failing to prevent money laundering in the UK Financial Conduct Authority’s first criminal prosecution of a bank on such charges. The penalty could be as high as £340m. Smaller recent European actions include a €4.25m fine levied by Germany’s BaFin against fintech N26 for weak money laundering controls.

But experts do not expect this year’s let-up to last for long.

Handley believes the lull has flowed through to 2021 fines, but says it is now back to “business as usual” for watchdogs like the FCA. “They clearly have their priorities in terms of anti-money laundering and they are doing things in relation to that, and using their criminal powers,” she added.

Additional reporting by Patrick Mathurin and Chris Campbell

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