A Spotlight on US Regulatory Enforcement Trends

The U.S, with its proactive group of regulators, accounts for the highest concentration of AML enforcement penalties, with a total of $23.52 billion comprising 122 penalties issued by the top 11 regulators.

The highest fine amounts were levied between the years 2012 to 2015 when $12.1 billion was imposed on only six financial institutions by a single regulator, the Department of Justice (DoJ), representing over 87% of the total fine amount imposed by the DoJ for the ten-year period.

Of the 11 featured US regulatory agencies that have issued AML/KYC and sanctions-based fines since 2008, the Office of Foreign Asset Control (OFAC) has levied the highest number of fines by count, totaling 29 penalties.  This is not surprising given the fact that OFAC, as a branch of US Department of Treasury, is primarily responsible for the creation and enforcement of economic and trade sanctions.

Indeed, examining the type of fines issued across all regulators, sanctions-related violations accounted for over $17 billion of the total U.S amount issued ($23.52 billion).

In terms of fines by US$ amount, the most punitive regulator is the DoJ, an agency that, among other responsibilities, investigates incidents of financial fraud.  The total fines amount issued by the DOJ, from 2008 to present, was just under $14 billion dollars, including an almost $9 billion fine against the US operations of a tier 1 French bank in 2015 for sanctions violations.

The Office of the Comptroller of the Currency (OCC) and the Federal Reserve, both tasked with supervising US-chartered banks, have imposed nearly $1.9 billion in fines.  

The New York State Department of Financial Services (NYDFS) has become noticeably more active since 2012 with its focus on AML and sanctions violations, imposing 14 fines totalling in excess of $3.6 billion.

Over $2.3 billion in fines has been levied by U.S regulators over the past 12 months with 50% of this amount being attributable to the first quarter of 2018, indicating a renewed focus on AML violations.

Foreign Banks & U.S Regulatory Fines

In regard to domestic branches of foreign banks in the US, banks headquartered in Europe have been penalized four times the total amount than their US counterparts.

US regulators have hit foreign banks hard in the last 10 years. Since 2008, US regulators have fined European-headquartered banks a total of $18bn.

Out of all EU countries, France has been hit hardest, in terms of the total amount levied, with 6 fines totalling nearly $9.7 billion levied against French banks by U.S regulators. The majority of this amount can be accounted for in one single penalty ($8.9 billion) issued by the DoJ in 2015 for sanctions violations.

In contrast, UK banks have received 18 fines totalling $4.3 million, demonstrating how US regulators are levying higher amounts for significant breaches and infringements.

Domestic branches of APAC banks have been fined more than $1.3 billion, based on 12 fines. Institutions headquartered in the Middle East have been fined $6.2 million from 4 separate fines.

Conclusion

The U.S. has taken an increasingly tougher approach to anti-money laundering enforcement over the past decade, levying 91% of the total amount fined globally. Regulators are increasingly starting to collaborate – in February 2018, the DOJ, FinCEN and OCC imposed a joint fine of $610 million against one major U.S. bank for BSA violations related to suspicious transaction reporting. Individual culpability is also increasingly coming to the fore as a regulatory enforcement trend with the Securities and Exchange Commission being the primary driver. It remains to be seen how the remainder of 2018 and the next ten years will play out in terms of AML and sanctions enforcement, but U.S. regulators do not appear to be easing back on this.