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As reported by Matthew Vincent in the Financial Times, regulators imposed bigger fines for anti-money laundering failures in the first six months of 2020 than they did in the whole of 2019, mainly due to companies’ repeated mistakes in their efforts to combat financial crime.

More specifically, the article quotes a recent study of global authorities’ enforcement actions by consultancy Duff & Phelps as the source of the data. The report “found that AML fines in the initial six months of 2020 reached a total of $706m, compared with last year’s aggregate of $444m“.

Interestingly, Vincent highlights that these recent penalties were imposed for exactly the same procedural shortcomings that regulators have been highlighting since at least 2015, including due diligence on new customers (which represents the most common failing, with 115 cases reported in the past 5 years), management of AML measures, monitoring of suspicious activity and ensuring on-going compliance with the rules.

According to legal experts interviewed by the FT, financial institutions’ continuous failings mainly reflected a lack of resourcing and upgrades to internal legacy systems and procedures. According to Anna Bradshaw, a partner at law firm Peters & Peters, “the root cause is always a lack of resources. AML resources are either not sufficient, or they are not allocated efficiently.”.

In fact, 2020 might well represent a turning point in this sense. Since the beginning of the global pandemic, financial institutions around the world have found themselves in need of replacing long-standing yet inefficient and risky AML and due diligence procedures with digital compliance solutions able to be accessed remotely, limit risks of fraud and deliver seamless customer experiences via multiple channels.

This digital shift is bound to shape the face of the sector for at least the next decade and the following months will be essential to determine which players will come out on top. Those financial institutions able to embrace change quickly and effectively will gain a competitive advantage that other contenders will struggle to match.

For a detailed analysis of what the future of AML and KYC compliance looks like, make sure to download our latest white paper.

Last updated on May 9th, 2023 at 10:35 pm

Claus Christensen

Claus Christensen is the CEO & Co-Founder of Know Your Customer. His vast array of previous experiences includes founding a technology company that develops email server infrastructure products for 60,000+ global customers and serving as VP Electronics at Thielert Aircraft Engines. A regular contributor to leading industry publications and a recognised expert in the anti-money laundering and financial regulation space, Claus is also the host of the RegTalks podcast and a senior lecturer of the Centre for Finance, Technology and Entrepreneurship (CFTE)’s RegTech Course.