The year 2024 witnessed a significant surge in anti-money laundering (AML) fines across various industries. This increase in penalties underscores the growing regulatory focus on combating financial crime and ensuring compliance with AML and countering the financing of terrorism (CFT) regulations. The article delves into the reasons behind this trend, examining the sectors most affected, common compliance failings, and the impact of recent regulatory changes. Firms across multiple sectors, including banking, cryptocurrency, gambling, payments, and trading and brokerage, faced substantial financial penalties due to their failure to adhere to stringent AML and CFT guidelines. The financial industry found itself at the forefront of this regulatory crackdown, with established institutions and burgeoning FinTech companies alike struggling to meet compliance requirements.
Regulatory Crackdown on AML/CFT Non-Compliance
In 2024, regulators around the world intensified their efforts to enforce AML/CFT regulations, resulting in substantial fines for non-compliant firms. This regulatory crackdown was driven by a heightened awareness of the risks associated with financial crime and the need to protect the integrity of the financial system. The increased scrutiny was evident across multiple sectors, including banking, cryptocurrency, gambling, payments, and trading and brokerage. The banking sector, in particular, faced the brunt of regulatory action, with fines exceeding $3.2 billion. Established institutions and newer challenger banks were both targeted for their failure to update compliance programs, file Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs) on time, and conduct adequate due diligence on correspondent banking accounts. These failings highlighted the importance of robust compliance measures to detect and prevent financial crime.
The cryptocurrency industry, which had seen explosive growth in recent years, was not exempt from heightened regulatory scrutiny. Firms in this sector faced fines totaling over $86 million due to deficiencies in their transaction monitoring systems, failure to report transactions exceeding regulatory thresholds, and onboarding high-risk customers without proper checks. This intensified focus reflected regulators’ determination to address the unique risks and challenges posed by digital currencies. At the same time, the gambling industry, particularly in Australia, faced substantial fines for allowing high-risk customers to use casinos to obscure their source of funds and failing to implement effective risk-based controls along with Know Your Customer (KYC) and Enhanced Due Diligence (EDD) checks.
Common Compliance Failings Across Sectors
Despite the differences in the industries affected, several common compliance failings were identified. Sanctions violations, inadequate customer due diligence (CDD), poor transaction monitoring, and improper SAR filing were prevalent issues that led to significant penalties. These failings highlighted the need for firms to implement effective compliance programs and stay vigilant in their efforts to detect and report suspicious activities. In the banking sector, failures to update compliance programs were particularly glaring. Banks that neglected to incorporate new regulatory requirements and adapt to evolving threats found themselves facing major penalties. The overarching issue often stemmed from neglecting high-risk jurisdictions and failing to conduct appropriate due diligence on correspondent banking accounts, resulting in broader exposure to financial crime.
In addition to the specific challenges presented by each industry, certain failings were universal. Inadequate customer due diligence (CDD) often led to the onboarding of high-risk customers without sufficient checks. This was a common shortfall in both traditional financial institutions and emerging cryptocurrency firms. Poor transaction monitoring systems also allowed suspicious transactions to go undetected, further exacerbating the problem. In cases where SARs were filed, they were often late or riddled with inaccuracies, undermining the effectiveness of these critical reports and consequently attracting regulatory penalties.
Sector-Specific Trends and Penalties
The payments sector saw a resurgence in regulatory attention, with fines exceeding $46 million. A fast-growing FinTech firm led the list of penalized companies, highlighting the sector’s vulnerabilities to money laundering and terrorist financing risks. Key compliance weaknesses included poor consideration of these risks and failure to implement effective business-wide risk assessments and a risk-based compliance approach. The scrutiny highlighted the need for firms within this burgeoning industry to prioritize robust AML measures. Trading and brokerage firms, while facing relatively lower individual fines compared to other sectors, were notable for increased regulatory action. The total fines exceeded $10 million, with common issues being the failure to file SARs timely, inadequate transaction monitoring and fraud prevention measures, and lack of documented AML policies and procedures.
The increased attention on trading and brokerage firms underscored regulators’ recognition of the importance of timely reporting and comprehensive monitoring within these environments. The diversity in fines across these sectors indicated a broad regulatory focus that extended beyond traditional financial institutions. The resurgence in financial penalties for the payments sector aligned with a larger trend toward scrutinizing emerging technologies and non-traditional financial activities. FinTech firms, often seen as agile and innovative, nevertheless faced traditional compliance challenges. These included inadequate risk assessment strategies and a failure to incorporate a risk-based approach to compliance. This sector’s vulnerability to financial crime underscored the necessity for proactive and informed compliance frameworks.
Impact of Recent and Upcoming AML Regulations
The surge in AML fines in 2024 can also be attributed to recent and upcoming regulatory changes aimed at enhancing the global AML/CFT framework. In May 2024, the European Union adopted a comprehensive AML package, harmonizing regulations across member states and establishing the Anti-Money Laundering Authority (AMLA). This move aimed to create a more consistent and effective approach to combating financial crime across the EU. The establishment of AMLA emphasized the need for a unified strategy to deal with increasingly sophisticated financial crime tactics. In the United States, the Financial Crimes Enforcement Network (FinCEN) tightened regulations for real estate firms and investment advisers in August. The Corporate Transparency Act (CTA) faced legal challenges, impacting beneficial ownership reporting. The evolving regulatory landscape in the US aimed to address significant gaps in transparency and accountability within specific industries.
Meanwhile, the United Kingdom introduced the Economic Crime and Corporate Transparency Act (ECCTA) to safeguard Companies House from fraudulent activities and impose victim reimbursement requirements for Authorized Push Payment (APP) fraud. The combination of these regulatory changes aimed to address existing vulnerabilities within the financial system and create a more robust framework for preventing financial crime. Each of these legislative actions underscored a global commitment to tighten AML and CFT regulations, ensuring a coordinated regional and international effort to curb financial crime. In addition, the AML/CTF Amendment Act in Australia expanded oversight to designated non-financial businesses and professions, while Singapore passed new legislation aimed at enhancing enforcement powers.
Strategies for Firms to Avoid AML Fines
The rise in AML fines in 2024 can be linked to recent and impending regulatory shifts aimed at strengthening the global AML/CTF framework. In May 2024, the European Union rolled out a thorough AML package to standardize regulations across member countries and set up the Anti-Money Laundering Authority (AMLA). This initiative aimed to develop a more coordinated and effective approach to fighting financial crimes throughout the EU. The creation of AMLA highlighted the importance of a unified method to counter increasingly complex financial crime tactics.
In the United States, the Financial Crimes Enforcement Network (FinCEN) imposed stricter regulations on real estate firms and investment advisers in August. Meanwhile, the Corporate Transparency Act (CTA) encountered legal hurdles impacting beneficial ownership disclosure. These changes sought to close significant gaps in transparency and accountability within certain industries in the U.S.
The United Kingdom responded by enacting the Economic Crime and Corporate Transparency Act (ECCTA), designed to protect Companies House from fraud and mandate victim reimbursement for Authorized Push Payment (APP) fraud. These actions collectively aimed to plug existing gaps in the financial system and create a stronger framework to deter financial crime. The series of legislative actions highlighted a worldwide dedication to tighten AML and CTF regulations, advocating a coordinated regional and international fight against financial crime. Additionally, Australia’s AML/CTF Amendment Act extended regulations to certain non-financial sectors, while Singapore introduced new laws enhancing enforcement capabilities.
