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What You Should Know About AML Penalties and Fines

But what if an entity other than a bank violates AML laws? Which violations result in the largest penalties?


What do you get when you mix financial technology with money laundering? A hefty fine, that's what. As fintechs and fintech startups become more popular, regulators are paying more attention to AML compliance. If you're not up to speed on the latest penalties and fines, you could be in for a nasty surprise. So, what do you need to know about AML penalties and fines? Keep reading to find out.

Money laundering is a widespread and lucrative crime. It's one of the most common financial crimes in America, but it doesn't have to be.

Depending on how severe an alleged money-laundering activity was (and if it was deliberate or not), there are criminal charges that can await offenders - including jail time! Even though this happens without malicious intent from those involved, financial industry owners/operators who fail to take certain steps when given guidance will still face fines if found guilty by federal and other regulators.

This article will cover some of the most important information regarding the current global state of money laundering, including the steps your organization can take to maintain positive partnerships with international authorities.

Some significant AML penalties and fines

As described by Interpol, money laundering refers to “concealing or disguising the origins of illegally obtained proceeds so that they appear to have originated from legitimate sources.” There are three stages to the money laundering process.

First, the money gets into the launderer's hands through the criminal activity that generates it. Second, the money is transferred through a complex series of transactions to mask the identity of the original receiver of the funds.  Third, the scheme uses a dodgy and deceptive method to return the money to the money launderer.

Money laundering is frequently a component of other serious crimes, such as drug trafficking, robbery, or extortion. Additionally, criminals will frequently exploit the increasingly complex global financial network.

To conceal their continuous actions, they may use foreign (offshore) accounts, special holding companies, innovative financial vehicles such as cryptocurrency, difficult-to-value assets (such as art), and other resources.

Depending on the scope, scale, and location of the illegal behavior, numerous institutions, including local governments, federal governments, and international organizations, can monitor and prosecute money laundering operations.

Unfortunately, in many situations, money laundering activities will continue for years before any legal action is taken. Nonetheless, many money launderers are finally caught.

Here is a look at some of the most significant and recent money laundering cases:

  • A multimillionaire Azerbaijani politician and his family must turn over millions in suspected funds transferred into the UK via the "Azerbaijani laundromat," a complex money-laundering scheme. A judge ordered Javanshir Feyziyev and his relatives to forfeit £5.63 million kept in multiple bank accounts after concluding that the funds "arise from criminal behavior" and "money laundering."

  • A resident of Queens, New York, recently pleaded guilty to "orchestrating a $653 million money laundering conspiracy, operating an unlicensed money transfer business, and bribing bank employees," according to a February 2022 report from the US Department of Justice, marking one of the year's most significant money laundering pleas.

  • Robeco was fined €2 million by AFM, the Dutch financial regulator, for failing to adequately check its customers for money laundering. Dutch financial institutions are required to report suspicious transactions to the Financial Intelligence Unit (FIU). When compared to other organizations, Robeco and its subsidiaries recorded only a few such transactions.
    Only two of Robeco's over 250,000 clients were classified as "provisionally unacceptable." These customers opened their accounts in 1986 and 1994.

  • In 2020, Goldman Sachs was charged with "bribery, money laundering, and outrageous exploitation of customer funds" through a unit of a multinational corporation situated in Malaysia, which resulted in a $3.9 billion fine—the highest in the bank's 151-year history.

  • The FIAU penalized XNT Ltd, a financial services company, €244,679 in administrative penalties. The penalty was imposed for a number of reasons, the first of which is customer due diligence. The regulator discovered that the company failed to fulfill its obligations to examine and gather information for the commercial relationship after conducting an inquiry. Furthermore, XNT Ltd had policy and procedural difficulties because they did not meet the requirements for customer screening.

  • Westpac was fined $1.3 billion after being prosecuted by AUSTRAC (an Australian agency), thanks to the adoption of the Anti-Money Laundering and Counter-Terrorism Act of 2006. The illegal operation, like many money-laundering schemes, was linked to a complicated network of multiple global enterprises, including a huge pedophile ring situated in Southeast Asia.

The Financial Action Task Force (FATF) has uncovered over $2 trillion worth of money laundered annually. This figure represents just a tiny fraction of all illicit activities taking place worldwide, and yet these cases demonstrate how seriously governments take their responsibility in combating such practices while also prosecuting them to the fullest extent possible under the law.

Priorities for AML regulations

In order to fight financial crime, new regulations are always being put into place. Regulations related to anti-money laundering (AML) are no exception. But as policymakers consider the next round of AML rules, what should be their priorities?

Financial crime takes many forms, from terrorist financing to money laundering to fraud. And while each type of crime requires a different response, there is one area where all types intersect: Money! That’s why AML regulations are so important; they help create a system that prevents criminals from using our financial system to launder money and finance terrorism and other nefarious activities.

The cryptocurrency and digital asset industries are likely to be among the areas of focus. Following the debut of Bitcoin in 2009, both of these industries have grown significantly in size—the current worldwide market cap for crypto is estimated to be just under $1 trillion.

Cryptocurrency advocates frequently emphasize the asset class's decentralized nature, which allows holders to control the asset's value rather than a centralized body such as the Federal Reserve.

While this is a clear benefit, it also makes these assets, as well as other digital assets such as non-fungible tokens (NFTs), extremely vulnerable to money laundering. So far, there has been little legislation governing how digital assets are declared, but this is expected to change.

Priority will also be given to transactions involving hostile foreign countries, particularly Russia. Following Russia's invasion of Ukraine, the US imposed further sanctions, pushing Russia beyond Iran to become the world's most sanctioned country.

Which AML violations result in the largest penalties?

If you're like most people, the words "anti-money laundering" (AML) probably conjure up images of large banks and financial institutions. After all, it's their responsibility to ensure that all transactions fall within government regulations. But what if an entity other than a bank violates AML laws? Which violations result in the largest penalties?

Several federal governments will take most AML non-compliance behavior seriously. Priority is usually given to any action that is tied to broader national interests, including money laundering linked to drugs smuggling, but notably money laundering linked to terrorist-related activities.

The USA Patriot Act, for example, has given the government enormous ability to combat terrorism and terrorist financing, even permitting it to circumvent many conventional court procedures (such as the need for a judge-issued warrant to look into vital financial records).

Best practices for avoiding AML penalties and fines

In the next few years, financial institutions can expect to see more lump-sum fines for violating anti-money laundering (AML) procedures. To avoid these costly penalties, it's important to start preparing now by establishing best practices and guidelines that will keep your company in compliance with regulations.

Even if an organization has no substantial knowledge of money laundering or money-laundering-related activities, authorities expect a basic degree of due diligence from all financial institutions; failure to achieve these standards can result in significant AML fines or, in some situations, harsher penalties.

In an ever-changing regulatory landscape, your AML compliance program must be adaptive, as should your technology stack! To keep ahead of financial crime, your approach should feature sanctions screening and politically exposed persons (PEP), as well as the ability to execute comprehensive transaction monitoring and risk scoring.

In conclusion

Using a fully customizable platform like Flagright can help organizations stay compliant and detect potential signs of money laundering. By combining identity verification, transaction monitoring, dynamic risk assessment, and sanctions screening within a sophisticated case management system; all organizations subject to AML requirements can ensure they stay within the law and prevent future fines or penalties.

In the wise words of Lao Tzu, "The journey of a thousand miles begins with one step." The same is true for money laundering prevention. It's not easy to stay up to date on all the latest regulations and policies, but it's important to do your best and take those first steps. And if you're feeling overwhelmed, don't worry - we're here to help.

Contact us here for a free demo of our AML compliance software, and let us show you how we can make compliance a little easier; and safer for everyone involved.

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