US standards on monetary penalties for AML violations set to surge next month

The potential monetary penalties and ceilings on fines for financial crime compliance failings in the US are set to surge next month, to in some cases roughly double their prior figures as the US Treasury and federal regulators adjust the numbers to account for inflation.

The increases are in response to the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015, passed as part of a larger budget bill in October, which requires Executive Branch and independent agencies to make annual adjustments for inflation to civil monetary penalty (CMP) dollar amounts, as well as an initial “catch-up” tweak based on a formula within the act.

Although pretty much everyone hates inflation – it makes your savings worth less and everything else cost more – the news may be particularly deflating to financial crime compliance officers who are already contending with higher regulatory scrutiny and have absorbed historic penalties in recent years that have soared into the billions of dollars.

And the jump up for individual penalty amounts, in some instances, is significant. Part of the reason is that some of the penalty figures have not been adjusted for roughly 30 years. As well, according to the rules, if an institution’s violations have occurred recently, it might already be under the new penalty regime.

One of the most substantial jumps is for “Willful violations of the Bank Secrecy Act,” where the range mushroomed from $25,000 to $100,000 to a span of $53,907 to $215,628. But even some minor violations saw their per violation figure go from $10,000 to nearly $20,000.

The new figures will be in place for all of the federal banking regulators, including the US Treasury’s Office of the Comptroller of the Currency, Federal Reserve and Federal Deposit Insurance Corp., though it’s possible other state and federal regulators with AML oversight could follow suit.

The adjusted civil penalty amounts described in the rule are applicable only to civil penalties assessed after August 1, 2016, whose associated violations occurred after November 2, 2015, the date of enactment of the 2015 Amendments, according to the US Treasury’s Financial Crimes Enforcement Network (FinCEN).

The means violations occurring on or before November 2, 2015, and assessments made prior to August 1, 2016 whose associated violations occurred after November 2, 2015, will continue to be subject to the civil monetary penalty amounts set forth in FinCEN’s existing regulations.

Want to know how much your AML CMP exposure will go up? Look below.

CMP violation description                                        Prior penalties           New max or range

Funds transfers records                                                     $10,000                              $19,787

Willful recordkeeping violations                                      $10,000                               $19,787

Failure to terminate foreign correspondent                 $10,000                                $13,384

Willful violations of BSA                                                   $25,000-$100,000            $53,907-$215,628

Foreign Agency Transaction – Non-Willful                  $10,000                                $12,459

Foreign Agency Transaction – Willful                           $100,000                              $124,588

Negligent violation by FI* or non-FI                              $500                                      $1,078

Pattern of negligent activity by Fi or non-FI                 $50,000                               $83,864

Violation of CDD on correspondents, shell banks       $1,000,000                         $1,338,420

CMP for failing to register as MSB                                  $5,000                                 $7,954

*Financial institution