EU update – April 2021

ABN AMRO fined (again!)

OPINION: The Dutch bank will pay a total of €480 million for violating the Anti-Money Laundering and Counter Terrorism Financing Act (AML/CTF Act).

These violations include failing to spot accounts involved in money laundering, failing to end relations with suspicious clients and failing to report these transactions to authorities.

This is another in a series of huge fines dished by regulators to European Banks, but this one stands out as a repeat offender. In 2005 ABN AMRO were fined €66 million for violating regulations to prevent money laundering (sound familiar) – failing to prevent $3.2 million to be moved from Russia and neighbouring countries into shell companies in the US.

A record fine at the time, the feeling was that ABN would be shaken, pull up their boot straps and get their house in order. Over 15 years on and another fine over 7 times that of the first for similar failings, it begs the question of whether the fines are having the desired effect.

What I hope will start to have an impact is the increasing number of individuals held personally responsible for contributing to these violations. After all, we have seen CEOs jump successfully from one fined bank to another unscathed, with just the bank and the public paying the price.

If they are to be held personally accountable and have their own position, wealth and even freedom on the line, would their approach to risk be different?  In the case of ABN AMRO, three former board members have been identified as suspects in this case and said to have been “effectively responsible for violation” of the anti-money laundering act.

This month we also saw the German regulator file criminal charges against Deutsche Bank board member over the Wirecard scandal and the CEO of Danske Bank resign after being named a suspect in a Dutch investigation.

FCA extends Financial Crime Reporting

OPINION: The UK regulator has increased the number of firms required to submit an annual Financial Crime report (REP-CRIM). The purpose of the REP-CRIM is to provide the FCA with insight into the potential financial crime risks faced by firms.

The number of firms will increase significantly from approximately 2,500 to 7,000 firms, due to the inclusion of additional sectors and in some cases removing the annual revenue threshold.  For instance, Cryptoasset firms will be required to submit a return regardless to their size, as the FCA deems that the products and services provided are at a higher risk of being used to launder money.

With this increased scope, it was surprising to then read in the recent RegTech report issued by The City of London Corporation that the regulator is reluctant to promote the RegTech industry. The increased reporting is welcome in the effort to fight financial crime, but these firms need direction in how they can put in place effective measures to fulfil these additional obligations.

Whilst no one is expecting a regulator to promote or back specific vendors or products, it would be helpful to have some direction in where the regulator feels a minimum standard of technology is needed. Without some level of guidance, newly regulated firms will no doubt make the same mistakes of other industries, where they use manual efforts or build inhouse systems, often wasting valuable time and resources, but more importantly failing to prevent the ML/TF.