Regulators will remain tough on financial crime despite global fall in violations

The first half of 2023 witnessed a significant drop in the total value of fines imposed on banks and financial services firms for financial crime violations, according to data from compliance firm Fenergo.

Regulators worldwide issued 97 fines related to financial crimes during this period, totalling $189 million. The downtick represents an 88 percent decrease from the previous year. Experts argue that this decline might be attributed to pandemic-related investigation backlogs and a heightened focus on strict compliance standards by financial firms.

While US regulators were responsible for issuing the large part of the financial penalties, UK agencies also contributed, handing out fines to the tune of $14.2 million in the first half of the year. This increase was primarily due to anti-money laundering (AML) fines for Al Rayan and Guaranty Trust Bank, up from $10.6 million in the previous year.

The largest fines were levied against individual institutions, with Wells Fargo facing the largest penalty of $97.8 million for lapses in sanctions oversight. Experts have cautioned against interpreting this reduction in fines as regulators going easy on financial wrongdoers. The fluctuation in fine levels is being attributed to the specific circumstances of each breach and the presence of mitigating or aggravating factors.

According to Rory Doyle, head of financial crime policy at Fenergo, regulators, especially in the US, are focusing on scrutinising larger institutions for serious violations rather than issuing enforcement actions against a multitude of smaller organisations for various violations. 

American institutions found themselves paying out for 83 percent of the total financial penalties during the period, despite representing only ten percent of enforcement actions. 

This approach reflects a desire by regulators to impose substantial financial penalties as a genuine punishment and a deterrent for both specific misconduct and the financial industry as a whole.