Penalties double to $11.8bn in global war on money laundering

Global regulators are clamping down hard on non-compliance of anti-money-laundering laws.

Fines for breaches of anti-money-laundering laws globally hit $US8.14bn last year.

Global regulators are clamping down hard on non-compliance of anti-money-laundering laws, with penalties almost doubling to $US8.14bn ($11.8bn) last year from 2018, as a spate of banks including Westpac found themselves in hot water.

Some 58 anti-money-laundering penalties were issued last year totalling $US8.14bn, analysis by regulatory technology firm Encompass Corporation found. That was a record number of fines and the second highest annual dollar penalty tally on record, behind 2014 at $US10.9bn.

Among the largest fines in 2019 were a $US5.1bn penalty levied in France against Swiss bank UBS, while Standard Chartered was forced to pay $US1.1bn to regulators in the US and Britain to settle allegations for breaching sanctions and anti-money laundering laws.

Locally, Westpac was embroiled in a financial crimes scandal in November when regulator Austrac started legal action against the bank, alleging 23 million breaches of the law. The case includes allegations that Westpac facilitated payments linked to child exploitation and pornography, and claimed the job of chief executive Brian Hartzer.

Analysts expect Westpac’s financial penalty to settle the matter will print at $700m to $1.25bn this year. In 2018, Commonwealth Bank paid a record $700m penalty to resolve legal proceedings brought by Austrac for anti-money-laundering breaches.

“Since 2015, annual AML penalty figures have been steadily rising each year. Multi-million-dollar fines have been commonplace for a while, but we are now seeing more penalties of $1bn or over,” Encompass co-founder and chief Wayne Johnson said. “We are not expecting the spotlight on money laundering to dim. The continued and increased focus on this area highlights the severity with which it is viewed at a global level.”

Austrac’s latest annual report for the year ended June 30, 2019 showed fines paid to the regulator amounted to just $188,000, down from the bumper $700.3m booked in the prior fiscal year.

The report also said in 2018-19 Austrac refused the registration of two digital currency exchange providers and suspended two others due to “risks posed by serious crime”. “In addition, we cancelled the registration of three remitters and suspended one due to ML/TF (money laundering/terrorism financing) risks. Registration of remitters will continue to be a focus for us in 2019-20.”

The annual report also made mention of Austrac ordering buy now, pay later company Afterpay to appoint an independent external auditor to assess its compliance processes.

Austrac’s “operational highlights” included the Fintel Alliance - a partnership between the private and public sector - contributing intelligence related to the arrest of more than 100 persons of interest and the protection of more than 170 victims of child exploitation.

Austrac and Westpac are working through an agreed statement of facts on the allegations raised last year. The bank has also kicked off an accountability review and deep dive into the emails of former and current staff to try and ascertain the reasons behind the sweeping compliance failures.