Nineteen domestic and international banks have paid a cumulative $12 billion in penalties, fines and forfeitures since 2009 for violating anti-money laundering, sanctions and corruption rules, according to a government report released Thursday.
The analysis by the U.S. Government Accountability Office (GAO), revealed that financial institutions between January 2009 and December 2015 paid $6.8 billion for violations of US sanctions programs, $5.2 billion for infractions tied to anti-money laundering (AML) requirements and $27 million for breaches of the Foreign Corrupt Practices Act (FCPA).
The figures, while both monolithic and sobering, are no surprise to banks of all sizes in the United States, which for roughly the last decade have faced more scrutiny, higher expectations and larger penalties for missteps tied to financial crime compliance programs, with the more recent wrinkle of increasing individual liability for significant programmatic deficiencies.
GAO auditors reviewed publicly available data and talked to the agencies involved, including all of the federal banking regulators, the US Treasury’s Financial Crimes Enforcement Network (FinCEN), Office of Foreign Assets Control (OFAC) and others.
Broadly, the report covers the most significant actions in the field of financial crime compliance, starting in 2009 with the $350 million forfeiture by Lloyds bank for “stripping” violations to the seminal nearly $2 billion HSBC penalty in 2012 and the historic roughly $9 billion BNP Paribas penalty for AML and sanctions missteps, wrapping up with the relatively miniscule forfeiture of $2.2 million by the Bank of Mingo last year.
The report shows a shifting diversity of penalties since 2009, making it potentially more challenging for banks to determine which compliance area should be the biggest priority or where institutions could face the largest degree of penalty exposure.
For instance, 2009 was dominated by penalties tied to sanctions violations, while for the next two years, AML fines took charge. In 2012, FCPA penalties became a force to be reckoned with, comprising roughly half of combined penalties.
Moreover, 2013 again shifted back to a major focus on AML penalties, while 2014 hit a record for combined AML and sanctions penalties. More recently, in 2015, FCPA penalties finally took a commanding lead for overall accumulated dollar figures.
The collections in these actions can be used to “support general government and law enforcement activities and provide payments to crime victims,” according to the GAO, adding that as of December 2015, the US Department of Justice and US Treasury had distributed about $1.1 billion to law enforcement agencies and about $2 billion was planned for distribution to crime victims.
The GAO didn’t have any more details on when these funds would be given to victims or what is the process for applying for these monies.
Of the approximately $11.9 billion collected, about $2.7 billion was deposited into Treasury General Fund accounts.
Conversely, the AML and U.S. sanctions-related criminal cases GAO identified since 2009 resulted in the forfeiture of almost $9 billion through the Department of Justice (DOJ) and Treasury, which can more directly apply these funds back to similar investigations.
Of the $9 billion, about $3.2 billion was deposited into DOJ’s Asset Forfeiture Fund (AFF) and $5.7 billion into the Treasury Forfeiture Fund (TFF), of which $3.8 billion related to a sanctions case was rescinded in fiscal year 2016 appropriations legislation.
From the horses mouth: Why GAO Did This Study
Over the last few years, billions of dollars have been collected in fines, penalties, and forfeitures assessed against financial institutions for violations of requirements related to financial crimes.
These requirements are significant tools that help the federal government detect and disrupt money laundering, terrorist financing, bribery, corruption, and violations of U.S. sanctions programs.
GAO was asked to review the collection and use of these fines, penalties, and forfeitures assessed against financial institutions for violations of these requirements— specifically, BSA/AML, FCPA, and U.S. sanctions programs requirements.
This report describes
(1) the amounts collected by the federal government for these violations, and
(2) the process for collecting these funds and the purposes for which they are used.
GAO analyzed agency data, reviewed documentation on agency collection processes and on authorized uses of the funds in which collections are deposited, and reviewed relevant laws.
GAO also interviewed officials from Treasury (including the Financial Crimes Enforcement Network and the Office of Foreign Assets Control), Securities and Exchange Commission, Department of Justice, and the federal banking regulators. GAO is not making recommendations in this report.