16 April 2020, 10:03
16 April 2020, 10:03
An attempt to hide the origin of the proceeds of crime with the aim of integrating them into the normal financial system, allowing criminals to profit and live from illicit funds. Simply said: it’s about concealing the criminal origin of money, to allow people to use it in the same way most of us would use hard-earned money.
Current estimates are that roughly only 1% of all laundered money is detected. This is a Global problem and allows people to profit from organised crime, human trafficking and weapons smuggling.
The United Nations Office on Drugs and Crime (UNODC) conducted in a study that criminal proceeds amounted to 3.6 percent of the GDP (more than USD 1.6 trillion) being laundered.
Most courses would break this down into the following 3 stages:
In simpler terms: It is moved around, split up and moved around some more until the origins of the money are well hidden and invested or placed into seemingly ‘non-suspicious’ assets (such as real-estate or companies).
This is a global problem. From Lenders and credit card companies to cryptocurrencies, factoring, fine art and jewellery, money laundering can be found in almost every industry.
Anywhere that a change of ownership can take place, whether over a financial instrument or a good, or via charging to goods and/or services through a myriad of corporate structures money can be laundered.
Trust in the financial system and integrity in banking and financial services and a strong reputation are not just desirable (and necessary) for financial institutions but also for national governments.
Through organisations such as FATF, countries and their governments are rated on their ability and efforts to detect and deter money laundering (and thereby deter organised criminal activity). A poor rating can lead to economic sanctions have a strong effect on the national economy and foreign direct investment.
AML fines are fines that are related to AML failures. Anti-money laundering fines continue to rise in 2021. Failures in and around compliance of financial institutions causes institutions heavy fines and personal liability.
When we look at the AML penalties in recent years, we can see the increase in the total penalty amount globally.
While the AML penalties given in 2018 were approximately $ 4 billion, the AML penalties given in 2019 increased by two times to roughly $ 8 billion.
Some of theses penalties have been paid by big institutions like:
1. Goldman Sachs ( – $2.9 billion + $2.5 billion – 1MDB scandal
2. FCA fines Commerzbank London £ 37.8 million for AML violations and breaches
3. Swedish SEB Bank Fined for Poor Anti-Money-Laundering Measures 150 Mio $.
4.Deutsche Bank (USA) – $150 million –
5. Westpac Receives Record Fines for AML Breaches
Australian bank Westpac a record of $ 1.3 billion. The penalty is a court order issued as a result of more than 23 million charges last year by the financial intelligence agency Austrac.
In total Fines related to anti-money laundering failures rise as companies repeat mistakes which also brings more pressure on regulators when it comes to the Fintech Sector.
AML Compliance is required for licensed financial institutions by law. It is not a nice it is a must have.
Despite this, there are a number of areas which increase the need and reason for setting your AML Compliance regime up correctly:
Reputational risk: Not only can reputational risk severely effect the valuation, revenue streams and market positioning of a company, shareholders are now suing for damages on the loss of value as a result of regulatory breaches. – This leaves companies not only paying fines, but also paying damages to shareholders.
Loosing Clients: You don’t want to fall into the trap that some of the FinTechs and Challenger Banks have, freezing accounts and funds that were not truly suspicious. You won’t regain the trust from customers.
Rising costs and Headcount: Compliance from Scratch doesn’t mean throwing people and bodies at the problem, regulators and your shareholders will expect you to use the best tools you can to ensure you have effectively mitigated the risks involved.
Regulatory enforcement & actions: Regulators keep a very close eye on Regtech Solutions in their Sandboxes and learn to understand the power of regtech and also its challenges. This means that they also expect you to have chosen an appropriate provider and not simply thrown a couple of basis threshold rules together.
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