Top lawyers say 2021 will be record year for AML penalties

Rick Steves

Federal regulators have imposed more than $200 million in penalties on corporations, just in the last two months.

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Federal regulators have imposed more than $200 million in penalties on corporations, just in the last two months.

This fact together with the increased scrutiny of compliance with AML and Bank Secrecy Act Obligations, have led top lawyers at Katten Muchin Rosenman to conclude 2021 will be a record year for penalties.

Scott A. Resnik and Michael M. Rosensaft, partners at law firm Katten Muchin Rosenman, said now is a good time for companies to review their AML policies and determine if they provide adequate protection or if updating is in order.

“Companies should expect to see a continued focus on AML compliance in 2021 with regulators and law enforcement using the new tools they have been given through the AML Act, assessing increased monetary penalties, and making concerted efforts to monitor AML compliance of non-banking entities”, they wrote.

The Federal Deposit Insurance Corporation (FDIC) assessed a $12.5 million penalty against a company for unspecified AML violations, and the Financial Crimes Enforcement Network (FinCEN) penalized a company $390 million for failing to file suspicious-activity and currency-transaction reports, and for failing to implement and maintain an effective Anti-Money Laundering program.

“These large penalties are consistent with an enforcement trend that has seen financial regulators impose escalating fines and penalties on companies for AML violations. Total penalties for such violations exceeded $10 billion worldwide in 2020”, said Mr. Resnik and Mr. Rosensaft, who warned that the US Congress has turned its attention to AML compliance as well.

“The National Defense Authorization Act for fiscal year 2021, passed over a presidential veto, included the Anti-Money Laundering Act of 2020 (AML Act). The AML Act includes provisions for the creation of a federal database of beneficial owners; expanded coverage of the Bank Secrecy Act of 1970 (BSA) to include areas such as dealers in antiquities and virtual currencies; made available additional tools for law enforcement; heightened penalties for violations; and enhanced the AML whistleblower law”.

The Federal Reserve, FDIC, National Credit Union Administration, and Office of the Comptroller of the Currency have specified four pillars that make up an adequate BSA/AML compliance program:

1) a system of internal controls that assure ongoing compliance;

2) independent testing;

3) a designated individual or individuals responsible for monitoring BSA/AML compliance;

4) training for appropriate personnel.

The compliance program must include a Customer Identification Program with risk-based procedures.

Anti-Money Laundering fines is 2020 led by Goldman Sachs

The Malaysian unit of Goldman Sachs, which played a vital role in securing funds for 1MDB, was responsible for the largest AML fine in 2020, of $2.3 billion in the United States and $2.5$ billion in Malaysia. Senior management was complicit in bribery, money laundering, and flagrant misuse of funds by their clients.

Goldman also paid a further $1.4 billion from other 1MDB assets seized around the globe in a bid to avoid prosecution. The company had never pleaded guilty in any financial crime investigation in its 151-year history. In 2020, it finally did and paid the largest fine ever imposed in the United States.

Other high-profile AML fines in 2020 included $900 million to Westpac Bank (Australia) for miscellaneous AML violations and $150 million to SEB (Sweden) on account of the Nordic banks scandal.

 

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