Report

AML Enforcement Actions

Surge in 2023
A Global Data Research Report
on Regulatory Compliance

© Copyright Fenergo fenergo.com

 Contents

Executive Summary 3

Foreword 4

Global AML Fines Overview for 2023 5

Key Enforcement Actions in 2023 9

Maturity Across Industries 18

Crypto Under the Microscope 19

Growing Pains in the Payments Industry 20

Understanding the Regulatory Landscape 21

Conclusion 23

AML Enforcement Actions Surge in 2023 Page 2

Executive Summary

2023 saw $6.6 billion in penalties issued to financial institutions (FIs) by regulators across the globe. This
figure was up markedly from 2021 ($5.4 billion) and 2022 ($4.2 billion) but still well short of the $10.6 billion of
enforcement action served in 2020. The value of penalties imposed by regulators worldwide on financial firms
surged by 57% in 2023.

Sanctions made up the lion’s share of anti-money laundering (AML) fine values in 2023, comprising $4.6
billion of the $6.6 billion global AML fine total. Crypto and payments firms received 90% of the total fine
values, making 2023 the first year when digital asset and payments firms surpassed traditional FIs regarding
regulatory fine value and severity for AML breaches. Crypto and payments-related firms received the four
largest fines of 2023, with US and Chinese regulators taking a particular interest in these emerging sectors.
Regulators sent a clear message that digital-first financial services providers are every bit as accountable for
AML as traditional FIs.

Know your customer (KYC) and customer due diligence (CDD) fines cost FIs almost $220 million worldwide, up
from just $2.3 million on the previous year. The increased focus from regulators on environmental, social and
governance regulations (ESG) also led to a 246% rise in ESG-related fines totaling just over $19 million.

The vast majority of the global fines total resulted from a single action by US regulators against Binance,
the world’s largest cryptocurrency exchange. Binance was fined a total of $4.3 billion for AML failings. The
company’s CEO, Changpeng Zhao, was ordered to pay a $150 million civil monetary penalty to the US
Commodity Futures Trading Commission (CFTC).

Fellow crypto exchange Coinbase received a $50 million fine from the New York Department of Financial
Services (DFS) for AML and KYC failings. In addition, Coinbase committed to spend a minimum of $50 million
to improve its compliance program within two years of the ruling. Coinbase’s Dutch operation also received a
$3.6 million AML fine in the Netherlands.

While crypto and payments companies dominated regulators’ focus in 2023, FIs cannot afford to take their
eye off the ball when it comes to AML.

In this report, we examine the key stories behind global AML enforcement actions during 2023 and explore the
trends impacting regulatory change during 2024 and beyond.

Methodology: We gathered and analyzed data on AML and ESG-related regulatory enforcement actions in 2023 from publicly available
sources for this report. Get in touch with the Fenergo team if you’d like to know more on how we collated this data.

AML Enforcement Actions Surge in 2023 Page 3

 Foreword
by Rory Doyle,
Head of Financial Crime Policy
Fenergo

After a two-year decline, 2023 saw a return to punitive regulatory enforcement action and multi-billion-dollar
penalties. While global fines are nowhere near the $10.6 billion of penalties handed out during 2020, we did see
a major focus on emerging financial services providers in 2023.

With the rise of crypto we are seeing policy across the world evolve in an attempt to prevent financial crime
and deter criminal activity. Global regulators bared their teeth to digital financial services providers with
crypto ($4.5 billion) and payments ($1.4 billion) firms being hit the hardest. Our findings highlight the need for
legislators to continue developing robust frameworks for AML to account for newer, digital-first providers that
operate outside of traditional finance models.

Looking forward to 2024, FIs of all sizes must ensure they are well prepared to identify, handle and report
financial crime as regulators double down on AML and countering the financing of terrorism (CFT). In the US,
the Securities and Exchange Commission (SEC) came down on individuals within broker-dealers for failing to
file timely Suspicious Activity Reports (SARs).

During 2024, we anticipate delays in enforcement activity in the European Union (EU) as new regulatory bodies
become established, namely the bloc-wide Anti-Money Laundering Authority (AMLA) and Germany’s Federal
Office to Combat Financial Crime (BBF).

This report highlights the most challenging AML hurdles FIs face today; from the ongoing shortage of qualified
financial crime professionals to the macroeconomic trends such as interest rate rises and how they’re
affecting the industry. This is especially true for the newer digital offerings that are usually reliant on external
funding and focused on hiring to build effective products and entering new markets over internal cost centers
such as compliance.

With more work to do with fewer resources, FIs of all sizes must look to technology to help them overcome AML
challenges. FIs must better detect and prevent financial crime while mitigating the risk of enforcement action.
FIs are getting better at handling financial crime by using systems like Fenergo to identify and bulk-report
financial crime to regulators. In addition, Financial Investigation Units (FIUs), such as the Financial Crimes
Enforcement Network (FinCEN) in the US, have made it easier for FIs to file SARs online.

Our analysis is designed to arm you with insights that will empower you to take steps to detect and combat
financial crime even more effectively and avoid the associated risks.

AML Enforcement Actions Surge in 2023 Page 4

Global AML Fines
Overview for 2023

Fine Values by Regulatory Region

The Asia-Pacific (APAC) region saw the highest percentage increase in fines during 2023, jumping more than
2000%, led by activity in China. North American (NAM) regulatory enforcement action values increased by
70% from the previous year, placing the region in the number one position in terms of monetary value. The
US accounts for the majority of this activity. But authorities in Canada imposed a crackdown on financial
crime which resulted in a 756% increase in fine totals. However, the increase in regulatory scrutiny was not
consistent globally as fines in EMEA dropped substantially from 2022 levels.

AML Enforcement Actions Surge in 2023 Page 5

 Fines Values Issued by Regulatory Jurisdiction

The US dominated global fines again, issuing the second-highest year of penalties since Fenergo’s research
began. Chinese regulators stepped up activity against FIs and individuals, with fines up from $55 million in
2022 to approximately $1.4 billion in 2023. Chinese authorities appear to be ramping up their AML enforcement
activity, becoming the second most punitive nation with regards to fine value globally, trailing behind the US.

Enforcement actions in EMEA were down significantly, especially in the UK, where total fines fell by 86% from
nearly $180 million in 2022 to $25 million in 2023. The UK’s National Crime Agency (NCA) launched a new SAR
portal in September 2023 to simplify the SAR filing process. FIs filed more than 54,000 SARs via the portal in
its first quarter since going live1. British regulators still ranked third globally for fine values despite the fall in
enforcement actions.

Meanwhile, the UAE is making moves to improve its reputation around financial crime and is hoping to get off
the Financial Action Task Force’s (FATF) ‘grey list’ which includes jurisdictions that are monitored more closely
for AML/CFT activity. Removal from the grey list will lead to fewer restrictions on cross-border transactions

https://nationalcrimeagency.gov.uk/who-we-are/publications/698-sars-in-action-issue-24-january-2024/file
1

AML Enforcement Actions Surge in 2023 Page 6

 Fine Values by Industry

Regulatory action against operators in the digital assets space dominated in 2023. Regulators, including the CFTC in the
US2 and the Monetary Authority of Singapore (MAS)3, issued guidelines around regulating cryptocurrency activities. The
CFTC raised concerns around the inherent security and financial stability risks and the crypto space’s reputation as a
shadow banking system. All of these factors require strict compliance oversight to protect consumers, the stability of
the global financial system and avoid AML enforcement actions for FIs. The MAS has gone a step further and compelled
increased risk awareness assessments for consumers in crypto to be carried out by operators.

Fines by Category

2
https://www.cftc.gov/PressRoom/SpeechesTestimony/oparomero8#:~:text=The%20CFTC%20will%20aggressively%20police,of%20crypto%20
fraud—the%20victims
3
https://www.mas.gov.sg/news/media-releases/2023/mas-strengthens-regulatory-measures-for-digital-payment-token-services

AML Enforcement Actions Surge in 2023 Page 7

The most significant increase in enforcement actions in 2023 was related to KYC and CDD regulatory
breaches, which rose from $2.3 million in 2022 to almost $220 million. This rise underlines the importance
of FIs having adequate KYC and CDD frameworks, not only to meet regulatory standards but to genuinely
understand their customer to avoid being exposed to or compromised by unexpected risk. Technology is key
to more accurate client vetting and streamlining during onboarding.

ESG-related fines in 2023 were also up on 2022 by 246%, although only two fines were issued, one each from
the US and Australia.

Top 5 Most Fined Regions by Financial Institution HQ Country

AML Enforcement Actions Surge in 2023 Page 8

Key Enforcement Actions in 2023

NAM

US regulators issued
Fine values up Largest fine issued

70% $4.3 billion 77%

of total global fines

EMEA

Fine values just

Largest fine issued was UAE steps up fines by

7% $16.5 million 892%

the size of 2022 totals

APAC

Fines values Australian FIs fined

China issued

23x $20k,
$1.4 billion after receiving
larger than 2022 in fines
none in 2022

AML Enforcement Actions Surge in 2023 Page 9

$3.1 trillion (about $9,300 per person in the US), that’s how much illicit money flowed through the global
financial system in 2023 according to a recent Nasdaq report4. However, regulators worldwide only issued
$6.6 billion (about $20 per person in the US) in enforcement actions against financial institutions, including
banks, digital assets providers, and payments firms.

The disparity in numbers can be hard to accept but there are multiple factors involved with any sanctions
from the regulator. Identifying the predicate crimes creating this dirty money is an incredibly difficult
task and is normally avoided as a requirement for issuing an enforcement action or fine. Instead, these
penalties are usually in response to weaknesses in the AML compliance framework that FIs have in place.

Of course, there are many working in the anti-corruption and anti-financial crime space that want to see
increased enforcement against FIs to put an end to these staggering figures.

“I think we need a lot more from the enforcement ... very often fines are just the cost of doing
business - we need those to actually start to weigh in this balance. So, a lot more from the
side of governments is needed as well to ensure or to force a change in behavior.”

Maíra Martini, Research and Policy Expert - Corrupt Money Flows, Transparency International5

However, this is a multi-layered problem and one in which technology has traditionally lagged behind the
innovation and ingenuity of financial criminals. There have been strides to combat this in recent years with
better SaaS technology solutions such as Fenergo. These focus on not only identifying businesses engaging
with FIs but also understanding the ownership frameworks behind those businesses to provide deep
customer understanding through customer lifecycle management and gaining a true picture of how they
operate.

As enforcement actions are often issued in response to AML failures, sanctions have become an easy way
for regulators to identify failings and respond appropriately.

Sanctions became headline news across the globe in February 2022, when Russia invaded Ukraine and the
geopolitical stage became heavily focused on the flow of money. Economic sanctions were used to try and
isolate Russia in response to the violence and FIs were pressured intensely to ensure they were not duped
into moving money for sanctioned entities. This included huge lists of both businesses and high-net-worth
individuals, usually oligarchs, to pressure Russia into ending its annexation of Ukraine.

And that’s only sanctions on one country that have been issued by the US, the UK, and the EU. There are
many existing sanctions programs in place with Iran and the Democratic People’s Republic of Korea (North
Korea) as the most well-known sanctioned nations.

In 2023, thanks to the detail of announcements issued by regulators, it’s become clear that one compliance
failure is outstripping all others when it comes to enforcement, sanctions. Sanctions breaches came
to the fore in the financial crime world. The biggest fine issued for the year was $4.3 billion, specifically
for sanction-related failures and exposure, making up the bulk of the year’s enforcement actions, the
remainder of sanctions-related enforcement actions come in at over $302 million, for an approximate total
of $4.6 billion.

The next highest enforced specific fine type is for KYC and CDD failures at approximately $220 million.
Given how tightly the two categories are related this should come as no surprise, and only reinforces the
importance of having a deep understanding of clients, not just when onboarding but throughout the entire
client lifecycle.

https://www.nasdaq.com/global-financial-crime-report
4

https://resources.fenergo.com/podcasts/transparency-international-ma%C3%ADra-martini
5

AML Enforcement Actions Surge in 2023 Page 10

North America
NAM - $5,078,824,023

North American regulators issued more than $5 billion in penalties for AML and ESG regulatory breaches during
2023, up 70% on 2022’s figure, which was just shy of $3 billion. Seven of the most significant enforcement actions
during 2023 were handed out by US regulators, including the largest two at $2.5 billion and $1.8 billion, which were
served to Binance for serious AML compliance violations. In addition to digital assets, banks ($489 million), wealth
management firms ($12 million), asset management companies ($25 million) and payments companies ($2.5
million) were among those at the receiving end of regulatory enforcement action.

Canada - $7,033,015

In Canada, local regulator, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) issued just
over $7 million in enforcement action to six financial institutions, a sevenfold increase on 2022. The majority ($5.4
million) was handed to a major bank for violations including failing to submit suspicious transaction reports and a
failure to develop and apply adequate policies and procedures for AML. Since the Cullen Commission’s final report on
money laundering in British Colombia concluded in June 2022, Canadian regulators have applied greater scrutiny on
financial institutions and their ability to detect and prevent financial crime. The commission was set up to investigate
money laundering in the province, exploring the extent of the challenge, the impacted sectors, the effectiveness of
existing AML efforts, barriers to law enforcement, and more6.

United States - $5,071,791,008

In 2023, regulators in the US stepped up their campaign against money laundering and financial crime with a 69%
increase in the total value of penalties issued to financial institutions. Fines associated with just six digital asset
organizations, including Binance, reached a staggering $4,546,267,523, representing 90% of the total fines imposed in
the US. The resurgence of regulatory enforcement action was in parallel to changes in policy in the region as the SEC
and CFTC make AML policy a priority for 2024.

“This unprecedented 69% surge in US penalties serves as a pivotal wake-up call. The
escalating year-over-year costs of penalties underscores the increasing need for a
paradigm shift. It is clear that strategic investments by financial institutions in cutting-
edge tools is not just advisable but essential to safeguard them from regulatory pitfalls
and ensure their sustained success in an increasingly complex environment.”

Tracy Moore, Director of Thought Leadership & Regulatory Affairs, Fenergo

FinCEN was also mandated to establish a beneficial ownership registry7. This was a direct result of the Corporate
Transparency Act (CTA) of 2021, which established uniform beneficial ownership information reporting requirements
for domestic and foreign entities, or “reporting companies”, which includes all financial institutions. FinCEN also
released its report into the financial activities of Russian oligarchs in 2022 to help FIs and regulators alike to spot
potential sanctions-based suspicious activity8. In response to the rise in crypto and the potential risks, the Financial
Innovation and Technology for the 21st Century Act – otherwise known as the ‘FIT Act’ – is going through Congress
and will establish a regulatory framework for digital assets.

US regulators were also active in penalizing firms for violations related to ESG. The SEC issued the single highest value
penalty to date for ESG, at $19 million, to an asset manager for materially misleading statements about its controls
for incorporating ESG for products, including certain actively managed mutual funds and separately managed
accounts.

6
https://cullencommission.ca/files/reports/CullenCommission-FinalReport-Full.pdf
7
https://resources.fenergo.com/reports/global-regulatory-outlook-2024-report
8
https://www.fincen.gov/sites/default/files/2022-12/Financial%20Trend%20Analysis_Russian%20Oligarchs%20FTA%20_Final.pdf

AML Enforcement Actions Surge in 2023 Page 11

Europe, the Middle East, and Africa
EMEA - $75,790,948

While North American and APAC regulators stepped up their activity, EMEA had a comparatively quiet year.
Fine values issued across EMEA plummeted by 93% during 2023, falling from $1.1 billion in 2022 to just $76
million in 2023. Of all the AML/CFT fines served in EMEA, the largest was just $16.5 million to a French bank.

The EU is currently undertaking significant transformation in the way it approaches financial crime with the
creation of the new Anti-Money Laundering Authority (AMLA). In the future, when AMLA is further established,
we can expect regulatory activity – and therefore possibly enforcement action – to increase.

Regulators in the UK were less active than in previous years, issuing just $25 million in penalties, a decline
of 86% from 2022. Fines issued in the UK ranged between $3.2 million and $9.3 million, three of which were
related to customer due diligence failings. Another emerging trend in the UK during 2023 was a debate
around FIs’ treatment of politically exposed persons (PEPs). In early 2024, UK regulators deemed domestic
PEPs to be considered as less risky than PEPs from overseas.

Meanwhile, the United Arab Emirates (UAE) has been making a concerted effort to get off the FATF’s ‘grey
list’ and looks set to come off the list during 20249. Countries on this list must work with the organization to
“address strategic deficiencies” in their frameworks to counter financial crime10. Additionally, in January
2024, it was reported the UAE made a substantial donation to the Egmont Group, whose aims include
training FIUs worldwide11. Overall, Emirati regulators seem to be signaling a renewed commitment to
combating financial crime, as they also fined FIs a total of $20 million in 2023, up by $18 million from the
previous year.

9
https://www.ft.com/content/cc8f3d4f-ccb0-4bca-93e3-bc2955de446d?
10
https://www.fatf-gafi.org/en/countries/black-and-grey-lists.html
11
https://www.amlintelligence.com/2024/01/news-greylisted-uae-makes-substantial-donation-to-body-representing-police-fius-globally/

AML Enforcement Actions Surge in 2023 Page 12

Belgium - $16,487,631

The National Bank of Belgium issued one fine in 2023 of $16.5 million to
a French headquartered bank, citing sustained AML failures throughout
the 2014 to 2019 period. There were significant weaknesses in verifying
customers trading in commodities such as precious metals and
commensurate flaws in assessing risk when detecting and reporting
illicit transactions.

France - $1,453,444

French regulators issued just under $1.5 million in fines, the largest of which went to an FI that had multiple KYC
and Know Your Business (KYB) failings. It crucially had lacking capabilities when it came to identifying PEPs, an
issue that is coming under greater scrutiny across the EMEA region and is affecting internal change at multiple FIs.

United Kingdom - $25,260,035

The verification of PEPs and their associated risks hit the headlines in the UK in 2023, leading the country to enact
legislation that came into force in January 2024 which designates domestic PEPs as less risky than foreign PEPs.
This change may alter FIs risk-based approach when engaging domestic PEPs, causing them to reduce the
intensity of their KYC and CDD checks during the onboarding process.

It’s yet to be seen if other jurisdictions will follow suit, although skeptics would argue that the move was
politically motivated.

The UK regulator, the FCA, issued $25 million in fines, an 86% reduction from 2022. Given that an election is
expected and that the UK has a historic issue with strong AML enforcement it may not have been a significant
focus for the UK in 2023.

Lithuania - $2,445,934

The Bank of Lithuania issued $2.4 million in fines, a significant change for the regulator that had issued
no AML fines since 2020. Yet in 2023, the regulator opted to impose 14 separate fines aimed mainly at the
payments industry, with only one digital assets company and one financial services firm being fined.

These fines potentially stem from illicit activity in the surrounding nations as Russia’s invasion of Ukraine
persists and oligarchs from Russia are continually desperate to transfer their funds outside of the heavily
sanctioned nation through nearby countries such as Lithuania.

AML Enforcement Actions Surge in 2023 Page 13

Malta - $1,346,657

Malta made a slight increase in its fines total for 2023, going up from
$779,000 in 2022 to $1.3 million. Local regulator, the Financial Intelligence
Analysis Unit often issues multiple fines per year and has made great
strides in implementing the recommended actions from its FATF 2019
Mutual Evaluation Report.

Netherlands - $3,700,768

Crypto took penalties from further afield than the US in 2023. The Netherlands issued $3.7 million in fines, with
$3.6 million of that figure going to a crypto exchange for failure to register with De Nederlandsche Bank while
operating. It’s a strong sign that the global financial community is taking digital assets more seriously and has
the same expectations as it would of any traditional FI.

Ukraine - $1,643,785

One Ukrainian bank had to pay $1.6 million, and had corrective measures taken against it due to the bank failing
to complement a money transfer with the required information about the transfer recipient.

The National Bank of Ukraine revoked a banking license and liquidated the bank, likely due to the bank
potentially moving money for Russia’s benefit following the invasion.

As the war in Ukraine persists, FIs in the region will need to be more vigilant than ever to ensure they’re collecting
the correct data and not allowing money to move through their systems unchecked.

United Arab Emirates – $19,812,979

The UAE worked hard in 2023 to rectify its financial crime reputation on the global stage. After having been
placed on the grey list in 2022, local regulators have come down hard on AML failures in the UAE issuing a
total of $20 million in 2023, up from $2 million in 2022.

Local regulators in the UAE are taking the grey list seriously, having revoked a license from a Russian bank
issued at the start of 2023 shortly after it was sanctioned by the US and UK.

AML Enforcement Actions Surge in 2023 Page 14

Asia-Pacific
APAC - $1,415,227,188

APAC’s regulatory scene in 2023 was dominated by a significant ramp-up in activity by the Chinese
regulator, the People’s Bank of China (PBOC), and a major AML scandal in Singapore.

China - $1,406,278,537

In China, the PBOC issued approximately 28 enforcement actions to FIs and their employees totaling $1.4 billion
in 2023, up from just $55 million in the previous year. Out of all its financial sectors, the wrath of regulatory
enforcement was felt most by China’s payments operators. Two of China’s payments giants – Alipay and
Tenpay - faced landmark fines this year of $986 million and $336 million respectively.

For China’s broader fintech sector, the fine to Ant Group – the company that owns Alipay – is a case study
in China’s continued low tolerance for private financial enterprises. Ant Group has already faced large fines
- notably $600 million (4.1 billion Yuan) in 2018 for payments regulation breaches12 - from the regulator and
famously had its initial public offering (IPO) vetoed by regulators in late 2020.

Almost half of the fines were issued to Chinese FIs for KYC issues, highlighting a clear focus from the PBOC on
client onboarding. The Chinese regulator also issued several fines to individuals occupying senior roles at FIs,
including six members of one major bank. This focus on prosecuting individuals, and not just their organizations,
for AML failures is nothing new: in 2022, PBOC issued 28 fines to individual employees, nine of whom worked at
the same online lender.

Singapore - $2,681,162

In 2023, the Monetary Authority of Singapore (MAS) issued three penalties totaling $2.7 million, up 228% from a
mere $818,239 in 2022. All three financial institutions, which included a US headquartered bank ($297,907), and
two Singapore-based banks ($1.9m and $446,860 respectively) were handed enforcement actions for breaches
of AML/CFT requirements. The breaches were identified during MAS’ examinations of the FIs following news of
irregularities relating to Wirecard AG’s financial statements and the alleged involvement of Singapore-based
individuals and entities.

Singapore was rocked by a huge money laundering scandal in August of 2023, with police seizing $1.76 billion
in assets from a pervasive criminal syndicate that had exploited the local financial system to great effect. The
uncovering of this criminal syndicate, made up of multi-national members with passports from nations that
have or have previously had passport-for-sale schemes, highlighted significant KYC weaknesses which could
invite regulatory consequences for the FIs involved, though they are not considered complicit in the scandal.

https://www.reuters.com/article/us-china-pboc-fines/china-fines-alipay-for-violating-payment-services-regulations-idUSKBN1KR18L/
12

AML Enforcement Actions Surge in 2023 Page 15

Hong Kong - $4,445,144

Meanwhile, in Hong Kong, 2023 was a relatively active year for regulatory
enforcement actions when compared with the year prior. In 2022, Hong Kong
regulators issued $2.7 million in fines for AML breaches, which rose by 65% in 2023 to $4.4 million.

The largest fine, worth $2 million, was issued to a Swiss bank for KYC failures, while the second-largest ($611,611)
was issued for sanctions breaches to a Hong Kong-headquartered futures trading firm.

In February 2023 FATF published a follow up report from its 2019 Mutual Evaluation of the country. It concluded
that Hong Kong had, at the time not yet implemented all the new requirements under Recommendation 15
for virtual asset service providers (VASPs). It did, however, note sufficient progress being made in addressing
compliance deficiencies previously identified concerning the Designated Non-Financial Business or Profession
(DNFBP) sector. It’s possible that Hong Kong’s marked rise in fine values this year is a display for international
watchdogs such as FATF to prove its regulatory regime is robust and making progress in preventing and
cracking down on financial crime.

India - $797,530

The largest fine issued by the Reserve Bank of India (RBI) in 2023 comprised $387,201 to a payments provider for
KYC failures. The average fine value issued for the year in India was around $35,000 by regional standards, this
fine was a standout at more than ten times the average value. With the exception of the payments firm, all other
enforcement actions in India were issued to Indian banks.

Every fine levied on Indian FIs by the regulator was for KYC breaches, signaling that the country’s AML regime is
still largely KYC-centric, a trend consistent with the last few years of enforcement actions within the country.

The regulator intends to widen KYC requirements, as per an announcement on May 3, 2023, to include practicing
chartered accountants, company secretaries, and cost and works accountants who conduct financial
transactions on behalf of their clients. This updated definition of entities covered by the AML framework does not
yet cover lawyers or the legal sector14.

New Zealand - $546,469

Since 2009, when New Zealand’s AML/CFT Act was introduced, regulators in the country have issued just a
handful of fines for AML. 2023 saw the first fine issued for AML since 2021, highlighting the relatively low volume
and frequency of fines coming from the region.

The only fine issued in 2023 was for around half a million dollars ($546,000), which was issued by the Financial
Markets Authority (FMA) to a broker dealer with headquarters in Hong Kong. The main failings highlighted by the
FMA were related to failures in customer due diligence as well as enhanced and additional due diligence. The
FI’s failures to terminate relationships where CDD was not possible, or to report suspicious activities by filing SARs
were also flagged in the enforcement action.

https://www.india-briefing.com/news/india-prevention-of-money-laundering-rules-2023-key-provisions-new-reporting-obligations-27347.html/
14

AML Enforcement Actions Surge in 2023 Page 16

Taiwan - $313,385

In 2023, Taiwanese regulators issued just one fine of $313,385 for AML breaches to a bank after weaknesses
were highlighted in its continuous monitoring of deposit accounts and transactions. The fine came after it
was discovered a former wealth manager had embezzled funds as well as fraudulently executing banking
transactions on customers’ behalf.

Chinese regulators, however, fined seven employees at Chinese FIs (which forms part of the Chinese fine total)
in Taiwan dollars, suggesting that the employees were Taiwan nationals.

Australia - $20,173

Australian regulators issued one of just two ESG-related fines issued globally. The ESG penalty - an infringement
notice worth $20,000 - was dealt to a US-headquartered asset management firm for greenwashing after the
Australian Securities & Investment Commission (ASIC) discovered the firm to have made false and misleading
statements about its application of a Carbon Emissions Exclusion Screen15.

The Australian Transaction Reports and Analysis Centre (AUSTRAC), the country’s chief AML regulator for the
financial services sector, accepted enforceable undertakings from four FIs but it issued no monetary penalties to
FIs in 2023. AUSTRAC instead focused its attention during the year on mitigating the money laundering risk in the
gambling industry, which materialized in a record-breaking fine (AUD$450 million) to a gambling firm.16

15
https://asic.gov.au/about-asic/news-centre/find-a-media-release/2023-releases/23-344mr-asic-issues-infringement-notices-to-northern-
trust-asset-management-for-greenwashing/
16
https://www.austrac.gov.au/news-and-media/media-release/federal-court-makes-ruling-crown-matter

AML Enforcement Actions Surge in 2023 Page 17

Maturity Across Industries

2023 marked the first year that crypto and payments firms surpassed traditional financial institutions in the
value of financial penalties received for AML breaches. Increased regulatory activity in 2023 points to maturity
issues within those sectors.

Fine Value Breakdown by Industry

Total: $6.5 billion

AML Enforcement Actions Surge in 2023 Page 18

Crypto Under the Microscope

Fines issued to digital assets firms represented 69% of global penalties in 2023, totaling $4.5 billion. Most of
this figure was down to enforcement actions by US regulators against cryptocurrency exchange Binance for
AML failings. Investigations by the FinCEN, OFAC and the CFTC led to a cumulative $4.3 billion penalty against
the company.

US regulators also went after individuals involved in AML shortcomings. Binance’s CEO Changpeng Zhao was
fined $150 million and subsequently resigned from his position, while Binance’s former Chief Compliance
Officer (CCO), Samuel Lim, received a $1.5 million civil monetary penalty from the CFTC. The CFTC also fined
Adam Todd, founder of crypto exchange Digitex, close to $16 million for failing to register the company as an
exchange. Todd was also barred from trading in markets regulated by the CFTC.

Crypto trading platform Coinbase was also found to have AML/CFT failings and was charged with a $50
million fine by the New York Department of Financial Services (NYDFS). The company was also made to
commit a further $50 million to strengthen its compliance processes over the next two years17. In the same
month, January, Coinbase was also fined $3.6 million by De Nederlandsche Bank (DNB) for failing to register to
operate in the Netherlands.

The CFTC stated in April 2023 that “fraud has become a hallmark of digital asset markets”, with
cryptocurrency scams up 183% between 2021 and 2022, totaling $2.6 billion in losses in 2022 alone18. US
regulators have crypto operators in their sights going into 2024, and we expect to see far more regulatory
activity around digital assets in 2024, both in the US and worldwide.

“It’s really at a point where around the globe, not just in the EU and the US, the
scrutiny and the regulatory oversight on crypto is going to be significant.”

Mihal Nahari, Board Advisor/Non-Executive Director/Strategic Risk Management

& Operational Resilience

We are keeping a close eye on developments in the US as the FIT Act progresses and approved Bitcoin-
traded ETFs enter the market. While some FIs offered Bitcoin ETFs as soon as possible, others have taken a
‘wait and see’ approach.

It is worth noting that while fines related to digital assets totaled $4.5 billion in 2023 (dwarfing the then-
record $193 million in crypto fines issued during 2022), when Binance is taken out of the equation, digital
asset penalties worldwide total just $78.6 million.

17
https://edition.cnn.com/2023/01/04/business/coinbase-settlement-anti-money-laundering/index.html
18
https://www.cftc.gov/PressRoom/SpeechesTestimony/oparomero8#:~:text=The%20CFTC%20will%20aggressively%20po-
lice,of%20crypto%20fraud—the%20victims.

AML Enforcement Actions Surge in 2023 Page 19

Growing Pains in Payments

Payment firms received more than a fifth (21%) of the fine values issued by regulators in 2023, with penalties
totaling $1.4 billion. The figure is skewed significantly by China, which accounted for 99.5% of the fine values to
payment firms and individuals involved.

Outside of China, $6.4 million in fines were issued to payments firms. US regulators handed out the largest fine
value to three payments firms for AML/CFT-related issues, totaling $2.5 million. The Lithuanian regulator, Bank
of Lithuania, was also particularly active against payment companies in 2023, handing out 12 fines totaling
$2.4 million to 12 payments companies from four countries.

The payments industry has a maturity problem. There are a lot of new players with potentially inexperienced
compliance staff, often due to the nature of the business as many are startups funded by venture capitalists
(VCs) and private equity firms. In addition, these firms may be feeling the credit squeeze due to high interest
rates around the world, which in turn may impact negatively on compliance and financial crime measures.

A potential lack of investment in compliance, coupled with a general shortage of skilled compliance
specialists worldwide, underlines the importance of maturing digital asset firms to use technology to ensure
their AML controls are watertight. With the right AML processes in place, emerging financial services providers
can reduce the risk of being fined while protecting their reputation and attracting both investment and the
best talent.

If interest rates fall as expected and more money enters the sector, we may see further investment within
the payments industry into machine learning, artificial intelligence (AI) and client lifecycle management
ecosystems, which will drive efficiencies in compliance and keep regulatory scrutiny at bay.

AML Enforcement Actions Surge in 2023 Page 20

Understanding the
Regulatory Landscape

The regulatory environment has caught up with emerging financial services and regulators are motivated to
set a precedent to ensure future compliance by digital asset and payments companies. Sanctions-related
fines feature heavily following increased scrutiny from regulators, particularly around the flow of money and
assets of Russian people of interest following the invasion of Ukraine. Three of the five largest fines served
on financial services organizations during 2023 were sanctions-related, demonstrating how regulators are
prioritizing sanctions violations.

5 Largest Financial Institution Fines of 2023

Economic challenges and tighter resources may have also led some FIs to divert resources away from
compliance, increasing the risk of negative regulatory scrutiny. It is essential that FIs of all sizes mitigate
potential revenue and reputational loss from regulatory penalties. Advanced financial compliance
technology such as Fenergo, can keep pace with evolving regulations and sanctions in real time, enabling FIs
to reduce the KYC burden and, therefore, negative regulatory scrutiny.

AML Enforcement Actions Surge in 2023 Page 21

2024 Outlook

During 2024, we will likely see a ruling on the FIs that were implicated for KYC failings in the Singapore
money laundering syndicate scandal19. The local regulator MAS will tighten up regulations in the territory,
meaning FIs must move fast to operationalize evolving rules. Increased scrutiny from regulators such as
MAS around Ultimate Beneficial Owner (UBO) and Beneficial Ownership Information (BOI) reporting serves
to underline the importance of using KYC technology to alleviate the burden when assessing new clients
and reduce the risk of a fine.

There will be a continuing focus on digital assets following the SEC’s approval of crypto ETFs. Several
large financial services providers have expressed an interest in launching a Bitcoin ETF with many having
launched them already.

Sanctions activity relating to Russian individuals and businesses will also be a major focus for regulators
worldwide during 2024. Especially with the potential for considerable geopolitical upheaval for nearly half
the world.

2024 is a big election year, with over half of the world’s population going to the polls in at least 64 countries,
including the United States, India, and probably the United Kingdom20. During 2024, new anti-money
laundering institutions in the EU will also be settling in, but we still expect to see increased sanctions-related
activity around the world. Overall, we expect to see some more minor activity with some standout big-fine
cases, while AML/CFT scrutiny, activity, and fines will ramp up significantly in 2025.

https://resources.fenergo.com/blogs/singapores-money-laundering-syndicate-scandal
19

https://time.com/6551743/2024-elections-democracy-trump-putin/
20

AML Enforcement Actions Surge in 2023 Page 22

Conclusion

Our research into AML and ESG fines highlights that regulators sent a clear message in 2023 to the
emerging digital asset sector that digital finance is still finance and will be held to the same standards as
other financial services. Regulators also took steps to provide further guidance for FIs on how to manage
digital assets, which will help the sector to grow and potentially flourish within clear legal frameworks.
Firms must acknowledge the urgency and take action to meet rising regulatory demands by implementing
robust risk-based programs that start with customer onboarding, and progress through real-time
monitoring, accurate reporting and compliance measures.

To meet their compliance obligations, digital-first banks must adopt more robust controls to prevent fines,
protect their reputation, assess and onboard clients faster and, ultimately, increase growth margins.

The total fine value in 2023 was bolstered by three huge standout fines. Moving into 2024, we will see an
increased focus on sanctions activity as cases work their way through the system. And with new regulatory
bodies in place, we can expect increased overall AML activity from 2025 onwards.

Regulators are making it easier to file SARs, and technology continues to play a key role in compliance. FIs
that accelerate the digital transformation of their AML/KYC operations benefit from gaining visibility over
entities and individuals throughout their lifecycle.

As firms seek to navigate an ever more complex socio-political climate coupled with a fast-evolving
regulatory environment, automation technology such as Fenergo can help FIs adopt a risk-based
approach to compliance and protect against enforcement action.

At Fenergo, we are committed to developing technology solutions that enable financial institutions to
automate AML/KYC processes and remain compliant in multiple jurisdictions.

Find out how to solve compliance challenges at www.fenergo.com.

AML Enforcement Actions Surge in 2023 Page 23

 About Fenergo
Fenergo KYC is an API-first, SaaS solution
that enables financial institutions to
efficiently manage global KYC due diligence
requirements throughout the entire lifecycle.
Our intelligent Policy Manager dynamically
determines the KYC and AML requirements
to be met during every stage of the
client lifecycle. The solution incorporates
continuous risk monitoring to ensure ongoing
compliance with KYC regulations and is
complimented by our sophisticated workflow
management capabilities to orchestrate the
client journey from onboarding, KYC reviews
to offboarding.

It streamlines operational efficiencies by

integrating seamlessly with Fenergo’s
industry-leading data, ID&V and screening
partners, eliminating silos between
operational and compliance teams, and
reducing client outreach.

For further information

about Fenergo

Visit www.fenergo.com

Email us
[email protected]

AML Enforcement Actions Surge in 2023 Page 24