The Biggest AML Fines in 2024 and 6 Ways to Avoid Them

Money laundering is just as prevalent to date as criminals learn and adapt to new technology. Staying abreast of Anti-Money Laundering (AML) regulations can help protect your business from money laundering risks and avoid unwanted fines.

The Anti-Money Laundering Act of 2020 (AMLA), in fact, strengthens the case of regulators and authorities focused on combating financial crimes.

Discover what AML fines you might face if you miss any compliance requirements, get insights on some of the biggest AML fines in 2024, and learn how to avoid them.

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What are penalties and fines in AML?

AML fines and penalties help enforce ethical and legal standards for the financial system. They serve as an extra layer of precaution to hold businesses and financial institutions accountable for their actions, ultimately protecting consumers.

Financial institutions can face severe penalties and fines after violating anti-money laundering regulations. Every jurisdiction can impose different penalties, with some issuing fines while others directing to jail time.

In more extreme situations, the entire business, individuals involved, or even countries may be sanctioned, prohibiting or limiting their capacity to conduct business with other financial institutions.

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Types of fines in AML

Businesses that fail to meet compliance can face several types of fines, depending on the complexity of their case. These can include:

• Civil fines
  Civil fines, ranging from thousands to millions of dollars, are imposed for non-compliance with AML requirements like Know Your Customer (KYC) and Know Your Business (KYB) procedures.
• Criminal fines
  Imprisonment and probation result from direct involvement with money laundering activities. Legal aids like lawyers and accountants are considered to be directly involved parties. For repeat offenders, penalties may be escalated with higher fines.
• Sectoral fines
  Industries have different fines. The banking sector is subject to higher fines due to its significant role as the frontline for detecting and preventing money laundering. Other sectors with specific fines for non-compliance with AML regulations include real estate and casinos.
• Sanctioned transaction fines
  Engaging in transactions with businesses, individuals, and countries that are included in sanctions lists will have penalties imposed as AML regulations require businesses to conduct sanctions checks for compliance.
• Personal liability fines
  Individuals like compliance officers and other employees who were directly involved in the violation or non-compliance case may also be fined and disqualified from holding positions in financial institutions. License revocation or suspension and cease and desist orders may also be issued.

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AML fines and penalties businesses should know

Governments across the world have differing AML regulations under their jurisdiction. It's up to the businesses to stay updated on the obligations set by their respective jurisdictions as they play a role in national security.

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Let's dive into some of the AML fines in the following countries.

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Fines in the US

Bank Secrecy Act

The Bank Secrecy Act (BSA) is a law that directly combats money laundering and applies to all financial institutions in the U.S. An AML compliance program must be implemented, following a risk-based approach. Upon investigation, corresponding penalties are issued for AML violations. Criminal penalties include a fine of up to $250,000 and imprisonment of up to 5 years.

In the event that a pattern is detected or repeat offenders are involved in over $100,000 within a one-year period, penalties are increased to $500,000, with imprisonment of up to 10 years.

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Office of Foreign Assets Control

The Office of Foreign Assets Control (OFAC) administers and enforces U.S. sanctions. Businesses in the financial sector are subject to their imposed regulations. Violating them can result in AML penalties and fines of up to $20 million, depending on the violation.

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USA Patriot Act

The USA Patriot Act aims to " Unite and Strengthen America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism." Ultimately, its goal is to combat terrorist financing risks and money laundering. In addition to integrating an AML compliance program, businesses in the financial sector must have an assigned AML compliance officer, conduct periodical AML training for employees, and run independent AML audits.

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Fines in the UK

Anti-Money Laundering Directives

The European Union (EU) follows a regulatory framework different from the US as it works with Anti-Money Laundering Directives (AMLDs). EU member states must adapt to the regulatory requirements in their respective legal systems, also called the Six Further Directives (6AMLD). Non-compliance can result in up to four years in prison. Meanwhile, economic sanctions are currently at €5 million.

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Proceeds of Crime Act

The UK's AML regulation elaborates on money laundering offenses listed under the Proceeds of Crime Act (POCA). Banks and financial institutions are required by law to enforce AML controls that enhance the capability to detect money laundering activity. The necessary customer due diligence and transaction monitoring procedures are non-negotiables.

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Case studies of AML fines in 2024

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MGM Grand and The Cosmopolitan

Fine issued

$7.45M combined settlement

Necessary actions

• External reviews
• Enhanced anti-money laundering compliance programs

The cause

Major Las Vegas casino resorts, specifically MGM Grand and The Cosmopolitan, have violated AML regulations by failing to fulfill a BSA requirement of filing a Suspicious Activity Report (SAR) based on several suspicious transactions.

Former MGM Grand President Scott Sibella pleaded guilty to failing to file a report throughout his tenure. This came at a point when both casinos were found to be connected to an illegal sports betting operation run by Wayne Nix, which Sibella was aware of but turned a blind eye to.

The Cosmopolitan also admitted that one of its casino hosts knew of the illegal operations but did not report the activity to their compliance department.

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Commerzbank

Fine issued

$1.5M or £1.45M

Necessary actions

Security and customer data updates

The cause

German bank Commerzbank failed to fulfill its AML obligations set by BaFin, the German Federal Financial Supervisory Authority. The bank and its predecessor, comdirect Bank AG, did not provide the proper security measures and update customer data within the allocated timeline. Their lack of due diligence cost the bank a hefty fine.

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Fairbrother & Darlow

Fine issued

£16,000 with added costs of £1,350

Necessary actions

Adhering to AML regulations

The cause

The Solicitors Regulation Authority issued fines early in 2024 to law firms with insufficient AML controls. Bracknell law firm Fairbrother & Darlow was one of them, and it was found to have been missing crucial anti-money laundering controls for almost six years.

The SRA found this firm disregarded any guidance and warning notices. As a result, the penalty issued fell under the 1.6% to 3.2% of annual domestic turnover.

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6 Best practices to avoid AML fines

Missing crucial AML rules in any jurisdiction can cost a business more than it bargained for. The best way to avoid unwanted penalties and regulatory fines is to ensure that your anti-money laundering procedures are comprehensive and up-to-date.

Here are some ways to improve your compliance.

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1. Implement AML policies that take a risk-based approach

Most jurisdictions enforce AML regulations, making compliance a non-negotiable obligation for businesses. Taking a risk-based approach with an AML policy tailored to your business's risks can streamline processes, keeping it focused and efficient.

This means running AML screening procedures to check customers against the necessary databases to determine their risk levels throughout the onboarding and KYC process. Sweeping through sanctions lists and adverse media allows you to plan what necessary actions to take if you move forward in your business relationship. Additionally, this can help identify politically exposed persons (PEP).

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2. Strengthened CDD and EDD procedures

Comprehensive customer due diligence (CDD) processes can prevent money laundering, terrorist financing, and fraud by ensuring that customers' true identities are known and their activities are monitored. With high-risk customers identified throughout the CDD process, you can automatically escalate and launch enhanced due diligence procedures.

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3. Conduct efficient KYB and KYC verification

Thorough CDD and EDD processes also set the stage for efficient KYC and KYB verification. By collecting accurate and comprehensive customer data, you can support advanced analytics in spotting suspicious activities.

There are tools that can help automate the full KYB process. Vespia's KYB platform, for instance, combines all the functionalities you need for KYB, KYC, and AML to keep you compliant. With Vespia's tool, you can automate AML screening and UBO discovery and never have to worry about employing the necessary monitoring and reporting procedures.

Additionally, Vespia provides access to over 4,000 databases that can cross-check customer information in more than 300 jurisdictions. This ensures accuracy and helps fast-track the verification and monitoring process.

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4. Run regular risk assessments

Conducting regular risk assessments demonstrates proactive AML risk management, which can prove useful in a constantly evolving regulations financial crime.

This practice can help strengthen your AML framework, as it identifies gaps in existing AML controls, keeping your processes updated and well-adapted to newer threats. Should there be any high-risk areas detected, the business can allocate resources effectively to mitigate risks.

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5. Automate ongoing monitoring

Automated systems for transaction monitoring enables businesses to get real-time insights and detect suspicious activities immediately. This allows timely intervention to occur while reducing the risk of human error throughout the monitoring process.

A good transaction monitoring tool should offer advanced analytics with machine learning that businesses can use to identify any complex patterns and anomalies that can immediately detect signs of money laundering.

Vespia's transaction monitoring solution uses sophisticated technology to conduct round-the-clock monitoring for large volumes of data, which notifies you in the event that suspicious transactions occur. This way, you can scale your business operations while effortlessly staying compliant.

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6. Perform internal audits and reviews

Whether or not regulations in your jurisdiction requires regular internal audits like the USA Patriot Act, performing routinely audits helps identify areas to improve in your AML program before they lead to regulatory violations.

Internal audits help build consistency across the organization, simultaneously reducing the risk of non-compliance. This initiative can play a part in ensuring your AML reports are accurate and timely once your AML audit schedule comes around.

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Taking control of AML compliance

Observing anti-money laundering regulations is as critical as ever for businesses worldwide, especially with constantly evolving technology criminals can use to launder illicit funds. The AML violations and fines issued in this year alone serve s a reminder that non-compliance comes at a cost.

To avoid these unwanted penalties and fines, taking a proactive approach to AML procedures can make a world of a difference. That's why Vespia's AML screening solution offers a holistic approach to keeping aligned with regulatory requirements.

Book a demo today and see how our solution can work for you.

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