In the UK, AML regulations have been in place since 2000 with the introduction of the Terrorism Act and the Proceeds of Crime Act which provided the definition of money laundering and the consequences that one engaging in money laundering would face.
The Money Laundering and Terrorist Financing Regulations 2019, Anti-Money Laundering and Counter-Terrorist Financing Guidance for the Accountancy Sector (2020) and the European Union’s 6th Anti-Money Laundering Directive have been implemented by financial institutions to tackle the issue of money laundering and prevent traditional crimes committed under the precedential crimes’ umbrella.
In the US, the FY2021 National Defense Authorization Act (NDAA) included significant reforms to the U.S. anti-money laundering (AML) regime. The NDAA includes the Anti-Money Laundering Act of 2020 (AML Act) and, within the AML Act, the Corporate Transparency Act (CTA). The AML Act seeks to strengthen, modernize, and streamline the existing AML regime by promoting innovation, regulatory reform, and industry engagement through forums, such as the Bank Secrecy Act Advisory Group (BSAAG) and FinCEN Exchange.
Failing to comply with AML regulations usually entail ending up in jail or paying a large fine, so let’s compare the fines issued from 2022 and 2023 to crypto companies versus those in traditional finance companies.
Traditional Finance firms:
Danske Bank forfeited $2 billion from the US Department of Justice for defrauding US banks regarding Danske Bank Estonia’s customers and anti-money laundering controls to facilitate access to the US financial system for Danske Bank Estonia’s high-risk customers. They were also asked to pay DKK 4.7 million to the National Special Crime Unit in Denmark and $413 million to the US Securities and Exchange Commission.
Santander UK was fined by the FCA for £107.7 million for repeated anti-money laundering failures which occurred between 31 December 2012 and 18 October 2017 and significantly impacted the account oversight of more than 560,000 business customers.
Santander had ineffective systems to adequately verify the information provided by customers about the business they would be doing and failed to properly monitor the money customers had told them would be going through their accounts compared with what actually was being deposited.
USAA Federal Savings Bank
Financial Crimes Enforcement Network (FinCEN) issued a $140 million civil money penalty against USAA Federal Savings Bank (USAA FSB) for willful violations of the Bank Secrecy Act (BSA) and its implementing regulations. The bank’s AML program did not meet minimum requirements of the BSA from at least January 2016 through April 2021 and failed to accurately and timely report thousands of suspicious transactions to FinCEN involving suspicious financial activity by its customers, including customers using personal accounts for apparent criminal activity.
National Bank of Pakistan
The National Bank of Pakistan was issued a consent order by the The New York State Department of Financial Services for $35 million in penalties to NYDFS. In conjunction with the Department’s enforcement action, the Federal Reserve Bank of New York also announced a $20.4 million penalty for alleged Anti-Money Laundering (“AML”) violations.
Bittrex received a penalty totalling $53 million from the US Department of Treasury for “apparent violations of sanctions and anti-money laundering obligations.” Apparently, customers in Cuba, Iran, Sudan, Syria and the Crimea region of Ukraine were able to make crypto transactions worth more than $263 million. The US Department of the Treasury’s Office of Foreign Assets Control announced a fine of $24 million while the Financial Crimes Enforcement Network announced a fine of $29 million on Bittrex.
Robinhood’s cryptocurrency unit has been fined $30 million by The New York State Department of Financial Services for alleged violations of anti-money laundering (AML) and cybersecurity regulations which included failures to maintain a culture of compliance or allocate resources to the programs as the company grew quickly.
Coinbase will pay a $50 million fine to the New York State Department of Financial Services to settle charges for opening user accounts without conducting sufficient background checks. The regulators found that the crypto exchange’s policies were in violation of AML laws and exposed the platform to potential criminal activity. Coinbase will also invest a further $50 million over the next two years to bolster its compliance program.
Binance was fined €3.3 million euros by the Dutch central bank for operating in the Netherlands without registration. The breach took place over a “prolonged period,” spanning from May 21, 2020, until at least Dec. 1, 2021.