Examining Anti-Money Laundering Enforcement Across Europe

Since the beginning of the financial crisis in 2008, financial institutions have had to deal with a series of regulations to increase transparency. The objective? Creating a safer, more robust and more transparent financial system.

Level of Fines at a Distant Second to the USA

Europe accounts for 7% of global AML fines levied in the last 10 years, totalling over $1.7 billion across 83 separate fines, with 17 regulators across 15 countries. There’s evidence that the level of fines is starting to slow. According to Laura Glynn, Fenergo’s Director of Regulatory Compliance, the number of fines is beginning to plateau globally after a very busy decade. However, the monetary amount of each fine is increasing for the more significant breaches and infringements. Despite this global decline, the European market was an outlier in 2018 with total fines of $903m, driven by the Dutch market issuing the highest fine in the past decade.

A Spotlight on European Enforcement Activity

UK - Dominating European Issued Fines

The UK’s Financial Conduct Authority (FCA) dominates European fines, accounting for more than 30% of European AML/KYC/Sanctions fines issued over the past decade. Considering that over $90 billion is laundered annually through financial institutions under their remit, the regulator is pioneering an aggressive agenda of cultural change, evidenced by the implementation of a revised regime for individual accountability in the financial sector, namely the Senior Managers and Certification Regime (SM&CR).

Netherlands – Record-Breaking Fines

Dutch financial crime prosecutors handed out a record European fine for the past ten years, totalling $900m, in a joint investigation with US authorities. A recent change to legislation allows regulators to impose turnover-related administrative fines for significant AML breaches to 20%.

Switzerland – Under Pressure

Switzerland’s position as a secretive offshore financial haven puts it under international scrutiny. Despite levying only 4 fines totalling $51m in the past decade, international regulators have imposed 12 fines worth over $675m for a range of violations including AML and tax evasion.

Luxembourg – A Change in Approach

After many years of a reticent enforcement approach, 2017 saw a shift with two heavy penalties totalling $14m against two institutions. This is overshadowed by internationally-led penalties of $152m against Luxembourg’s financial institutions.

Nordics – Increasing AML Focus

Denmark and Sweden have sanctioned and fined five leading financial institutions for AML violations and offences over five years amounting to $17.2m in punitive fines. In total, $1.5m was levied on Nordic financial institutions by international financial regulators. This makes it the only region in the world where Nordic banks have been fined by domestic regulators more than by international regulators. It is expected that big changes may arise in this region with current investigations against Nordic banks taking place across Denmark, Estonia, US and the UK.

The Changing Face of Regulatory Enforcement

With the implementation of new regulations, including MiFID II and GDPR over the past year alone, we can expect to see European regulators continue to flex their enforcement muscles.

For financial institutions, compliance and the rate of regulatory change will continue to be a main concern but as the industry moves beyond mere survival mode to double-digit growth, the new battleground is client experience. Delivering excellent client experience by future-proofing compliance, investing in financial and regulatory technologies and placing the focus and value on the client will allow financial institutions to stay ahead of the market.