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Asia takes the lead in fining banks over compliance fails

Fenergo reports the 1MDB scandal highlights the poor state of financial compliance among banks.



For the first time, regulators in Asia Pacific handed out more penalties, in terms of value, than counterparts in the U.S.

Multiple regulators including Malaysia levied a total of $6.8 billion of fines against Goldman Sachs in 2020 for its involvement in the 1Malaysia Development Berhad (1MDB) scandal.

Last year is on track to match 2015, the previous record year for fines against banks, according to a report by Fenergo, a fintech that would like banks to use its services to help them do a better job of staying out of trouble.

The company says worldwide, banks in 2020 were fined $10.6 billion for breaching rules for know-your-customer procedures, anti-money laundering, data privacy, and European market regulations.

Of that, Asia Pacific accounted for $5.2 billion, an approximately 8x increase from a mere $6.6 million in fines the region’s authorities levied in 2019.

In addition to 1MDB, AUSTRAC, Australia’s financial crime surveillance authority, levied nearly $1 billion of fines against Westpac over breaches of its AML system – the largest civil penalty in Australian history.

“APAC has overtaken the U.S. in terms of the value of enforcement actions for the first time since 2015, and there has been an increased focus on individuals being penalized than we have seen in previous years,” said Rachel Woolley, global director of financial crime at Fenergo.

Singapore (which was rocked by scandals among its commodities traders), China and Hong Kong’s authorities also handed out substantial penalties, although the single most punitive regulator in 2020 was the U.S. Department of Justice, which handed out enforcement actions totaling $1.9 billion to Goldman Sachs, Bank Hapoalim and Union Bancaire Privée.

Seeing Asian regulators hand out serious penalties is perhaps a good sign, in that it shows their enforcement powers have teeth. On the other hand, all of this activity shows that compliance in banking is broken.

Marc Murphy, CEO at Fenergo, says probably fewer than 1 percent of criminal funds laundered through the financial system gets confiscated by authorities. One reason is lack of standards and cross-border collaboration. Another is that compliance for KYC and AML remains manual.

According to the firm, the countries in APAC that issued the most fines in 2020 by value are:

  • Malaysia, $3.9 billion
  • Australia, $921 million
  • Singapore, $123 million
  • Hong Kong SAR, $108 million
  • China, $100 million
  • India, $16 million
  • Pakistan, $12 million

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