Avoiding a breach of Anti-Money Laundering (AML) regulations–and the fine that follows–should be a priority for any company in 2023. The financial costs of a compliance failure is increasing, with global fines against companies rising by 50% year-on-year. In the latest blog in our AML series, we look some recent global fines for alleged money laundering failures. We then highlight four ways for firms can avoid a compliance breach and a fine–and how Nexis® Solutions can help to improve their AML process every step of the way.
Quantifying the damaging impact of money laundering fines
The total fines paid by companies to settle alleged money laundering and other financial crime breaches rose dramatically by 50% in 2022, according to Fenergo. A striking feature of recent money laundering fines is that they have been truly global, following investigations by enforcement agencies across the world. For example:
- UK regulators announced in 2023 that they had seized over USD$7 million from a bank account implicated in laundering money under different company names as part of the Operation Car Wash corruption scheme in Brazil.
- The Netherlands Central Bank fined a cryptocurrency firm €3.3m for failing to register properly under the country’s AML rules.
- The United Arab Emirates’ Central Bank fined a finance company nearly USD$500,000 in February 2023 for allegedly breaching AML legislation.
- Hong Kong’s Customs and Excise Department announced nine arrests related to alleged money laundering in 2023. This was in relation to transfers worth over USD$750 million through banks in Hong Kong between 2020 and 2022.
These heavy fines reflect the growing financial and legal risk to companies if they fail to put in place adequate AML procedures, including an effective risk-based due diligence programme. The cases above also inflicted strategic costs on companies as they diverted senior management’s time and effort into responding to the allegations and remediating any breaches. Moreover, it caused reputational damage as the fines made headlines around the world.
Four ways firms can avoid money laundering fines
Our recent AML series has been exploring how companies can improve their ability to detect suspected money laundering and act to mitigate those risks. Four of the most important tools that companies need for this are:
- Data: Bringing in a wide range of accurate and trusted datasets can help companies to determine if a given customer or third party carries a high risk of money laundering. Once the risk level is established, the company can then decide how extensively it carries out due diligence on the target.
- Technology: Technology can help companies to search these large datasets to surface risks efficiently, which removing the potential for human error. Many banks are using AI and Machine Learning technologies to detect suspicious transactions by their customers.
- Ongoing monitoring: Money laundering risk does not stand still. New developments are constantly springing up, from a change in legislation to a newly-imposed sanction. Companies therefore need to carry out regular, periodic due diligence on third parties and customers to ensure any new risks are captured in the company’s AML strategy.
- Reporting: Clear and effective reporting on a company’s money laundering risk exposure allows management to understand and act on emerging risks, and helps to satisfy regulators’ expectations of the effective functioning of AML procedures.
How Nexis® Solutions can help firms to improve their AML compliance
Nexis Solutions combines comprehensive data and the latest technologies to support companies with each of the four tools outlined in the paragraph above. This includes:
- Data: We provide companies with trusted and authoritative data from the most relevant sources, including news data (and adverse news data); PEPs and sanctions data; company data; and ESG data. This data includes an extensive archive and news searches going back more than 40 years.
- Technology: We support firms to deploy technology across these data source to improve their approach to due diligence and money laundering risk management.
- Ongoing monitoring: We help you to automatically capture changes to risk in an ever-changing world. We add millions of documents to our system every day to help your team unlock the most up-to-the minute insights.
- Reporting: Nexis Diligence+
includes an integrated report builder that generates customised, auditable reports on third parties. These reports can be tailored to assess the level of risk each third party brings. They can be brought to life with visualisation, summarisation and risk scoring for easy digestion and presentation by the board.
Compliance: a return on investment
The global economic downturn has prompted many companies to seek to cut their overheads and costs. But if companies reduce their compliance budgets, they increase their risk of fines and legal action as well as reputational and strategic risks of a money laundering regulatory breach.
Investing in AML and due diligence can help companies to avoid costly fines. It can also offer a return on investment because surveys suggest that more and more consumers, investors and employees want to buy from, invest in and work for companies that are committed to ethical business practices. Moreover, technology platforms like Nexis Diligence+ can actually help firms to reduce their expenditure on time-consuming manual due diligence searches and free up compliance officers to perform higher value work.