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Global AML, regulatory fines levied on FIs soar in 2023

Thursday, January 11, 2024 — 13:01:58 (EST)

New York – January 11, 2024 – Fenergo, the leading provider of digital solutions for client lifecycle management (CLM), know your customer (KYC) and transaction monitoring, today released its annual findings on global financial institution enforcement actions, which reveal that the value of penalties imposed on firms surged 57% in 2023.

Penalties for failing to comply with anti-money laundering (AML), KYC, environmental, social, and governance (ESG), sanctions and customer due diligence (CDD) regulations totaled $6.6bn in 2023, up considerably from $4.2bn in 2022 and $5.4bn in 2021. The highest value fine at $4.3 billion was issued to the world’s largest cryptocurrency exchange, Binance, in relation to AML failings. Binance was ordered to pay the fine to resolve investigations by the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), Office of Foreign Assets Control (OFAC) and the Commodity Futures Trading Commission (CFTC).

The Cayman Islands, where Binance is headquartered, has subsequently seen the single largest regional increase in fines received from global regulators, from just over $3m in 2022 to more than $4.5bn in 2023. Among the most punitive jurisdictions with the highest penalty totals were the US, which saw an increase of 69% to $5.1bn, the second highest year on record, and China, up from $55m to $1.4bn in 2023. Regulators in the United Kingdom were more lenient, handing out penalties to FIs totaling $25.26m, down 86% from 2023.

Crypto and payments firms have driven the biggest uptick in fines this year, representing 69% and 21% of global penalties, respectively. According to Fenergo’s analysis, 2023 marks the first year when crypto and payments firms surpassed traditional financial institutions with regards to the value and severity of financial penalties received for AML breaches.

Broadly speaking, the most significant increase in enforcement actions relates to KYC and CDD, rising to a staggering $219m over the last 12 months, up from $2.3 million. Following a similar trajectory, ESG fines have increased by 246% to reach a record high of $19m in 2023. “In the upcoming year, financial institutions will contend with persistent challenges carried over from the previous year. These include tackling the widening educational disparity and coping with a shortage of qualified financial crime experts responsible for thorough client due diligence,” said Tracy Moore, Director of Thought Leadership at Fenergo. “Faced with heightened responsibilities and constrained resources, these organizations must look to cutting-edge technologies like machine learning and artificial intelligence to narrow the skills gap and minimize the risk of potential enforcement actions over the next 12 months."

ENDS

About Fenergo:

Fenergo is the leading provider of Client Lifecycle Management (CLM) solutions that digitally transform how financial institutions, asset management and fintech firms onboard and manage clients throughout their client lifecycle. Its software digitally orchestrates every client journey from initial Know your Customer (KYC) and client onboarding, automating regulatory compliance and enabling continuous monitoring throughout the client lifecycle (transaction monitoring, perpetual KYC), all the way to client offboarding. Fenergo is recognized for its in-depth financial services and regulatory expertise and out-of-the-box rules engine which ensures financial institutions are future-proofed against evolving Environmental, Social and Governance (ESG), KYC, Anti-Money-Laundering (AML), tax and prudential regulations across 120+ jurisdictions. Headquartered in Dublin, Ireland, Fenergo has offices in North America, the UK, Poland, Spain, South Africa, Asia Pacific, and the United Arab Emirates.

For further information about Fenergo, please visit: www.fenergo.com

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Source: Company press release.