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Tackling the Financial Crime Challenge in Asia-Pacific

The APAC region, home to over 40+ regulators, is one of the most complex jurisdictions in terms of regulatory compliance. Over the last ten years, the region, as a whole, has levied a total of $609 million in AML, KYC and sanctions fines, according to Fenergo’s 2008 – 2018 Global AML fines research.

88% of the ten-year total relates to a single fine levied in mid-2018. The landmark $534 million penalty was issued by the Australian financial regulator, AUSTRAC, against a tier 1 Australian bank for repeated AML violations over a 3-year period, marking a 10 year high for AML penalties in APAC.

In fact, despite the general global decline in AML, KYC and sanctions fines, APAC regulators are just starting to reach their stride, strengthening their AML policies and procedures. With several FATF mutual evaluations looming, many countries are expected to increase their compliance spending over the next year.

APAC Enforcement Activity Under the Microscope

Australia – Highest Issuer of AML Fines
The record penalty of $534m in June 2018 has shaken the Australian market. After years of being behind the curve in compliance spend, it’s expected that the significance of this enforcement action will result in increased compliance spending.

The Australian Bankers’ Association estimates that significant financial institutions in the region (four major FIs and three regional lenders) have together spent AUS$1.73bn in recent years on implementing regulatory change including tax compliance and anti-money laundering. This can be contrasted against the estimated spend of between US$900 million and US$1.3bn that major international financial institutions are now spending individually.


The Philippines – Taking a Tougher Stance
The Philippines has only meted out a single fine for AML non-compliance during its history but still managed to rank for the second highest fine imposed by any APAC regulator. In 2016, the Philippine’s central bank, Bangko Sentral ng Pilipinas, fined a Philippine bank $21.3 million for its involvement in the laundering of funds stolen from the Bangladesh Central Bank in a cyber heist. The bank in question was used by cybercriminals to channel $81m stolen from Bangladesh’s central bank earlier that year.


Singapore – A Fresh Approach
A notable change in approach has occurred in Singapore, with the Monetary Authority of Singapore (MAS) issuing fines of $17m across nine separate instances, each for AML violations since 2016. Prior to this, MAS had issued zero fines. MAS has been heavily focused on the two-year investigation into the highly publicized 1MDB state fund scandal, which resulted in two AML penalties for more than $1m. In addition to these penalties, MAS closed the local branches of two financial institutions for AML weaknesses and improper conduct by senior banking personnel.

Hong Kong – Cleaning up its Act
Having long had a reputation as a conduit for dirty money, Hong Kong is keen to promote its recent enforcement actions, especially considering its upcoming FATF mutual evaluation report. With a raft of fines over the past eighteen months, the enforcements send a strong signal to the market and serve as a warning to other FIs in the region. AML and CTF compliance will certainly be a priority in 2018 and beyond.

The Changing Face of Regulatory Enforcement
Over the past ten years, regulators in the Asia-Pacific region have significantly increased their focus on financial crime, AML and due diligence as key areas of enforcement activity. Between 2008 to 2010, no regulatory fines were issued regionally for AML or sanctions violations, yet this area has steadily increased to a record high of $541 million in 2018. Regulators are continuing to maintain the pressure in APAC as many FIs play catch-up with global and, in many cases, newly enhanced local due diligence rules.

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If you would like to access the full report of Fenergo’s Asia-Pacific Anti-Money Laundering & Sanctions Fines Analysis, please download the whitepaper here.