Surge in AML Fines Expose Financial Institutions’ Compliance Shortcomings

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By John Leahy Senior Product Manager
January 25th 2023 | 3 minute read

Are financial institutions around the world doing enough to implement robust anti-money laundering (AML) and know your customer (KYC) capabilities? New figures suggest not.

Banks and other financial organisations were fined almost $5 billion last year for AML infractions, KYC system failings and sanctions breaches, bringing the total meted out since the global financial crisis to around $55 billion, according to a recent Financial Times article.

The fines levied in 2022 marked a jump of more than 50% on the year before, “fuelling warnings that such penalties are not curbing the behaviour and systems flaws that allow criminals to channel money through the global financial system,” the Financial Times article noted.

“There’s a lot of evidence, particularly in the UK and the US, in terms of recidivism . . . repeat offending by the big firms after they’ve been fined for things,” Huw McCartney, co-author of a 2019 study on the impact of post-crisis fines on the Anglo-American banking markets, was quoted as saying.

Companies usually put more resources into compliance and monitoring following a fine, but remediations could be “quite poorly enforced and monitored both within the firm and by the regulators themselves,” McCartney added.

Cost of compliance failure

With as much as $5 trillion in illicit cash estimated to be flowing through the financial system each year, firms clearly need better AML/KYC and sanctions monitoring tools – especially as the costs of failings continue to rise.

Investor “tolerance of banks’ AML shortcomings is very low nowadays,” noted Autonomous Research co-founder Stuart Graham in the FT article. “Cutting corners on AML/KYC processes just makes no economic sense when the fines, remediation costs and reputational damage can be so high,” he said.

AML weak points

So why are institutions still running the risks? Is financial crime too large, complex and costly a problem to be tackled effectively?

Criminal sophistication certainly complicates financial institutions’ AML and sanctions enforcement tasks. But many of the lapses – and the resulting regulatory fines and censure – stem from simple process weaknesses.

Inadequate onboarding procedures that lack proper investor and multi-level beneficial owner screening, risk-based profiles of prospective clients and source of funds/wealth checks are worryingly common. As are deficiencies in ongoing due diligence throughout the customer relationship.

AML and KYC responsibilities don’t stop once a client is in the door. Post-onboarding, firms should undertake periodic client profile and documentation checks, and continued screening. Real-time suspicious activity monitoring – a cornerstone of effective AML programmes – is vital in spotting money laundering risks and blocking suspicious activity/behaviours.

Staff need solutions

Effective training can go a long way to strengthening firms’ anti-money laundering defences. Staff need to know what warning signs to watch for, and that there are sensible, robust procedures in place for them to follow.

But the most highly-trained, super-aware employees in the world can’t do it alone. Effective compliance demands real-time visibility and control at every stage of the client and transaction lifecycle. The volumes of customers and documentation are too great, the criminal networks too sophisticated, and the cross-jurisdictional regulations that financial institutions must meet too diverse and exacting to rely on manual effort.

The only solution lies in adopting an automated, systematic, multi-jurisdictional approach.

Today’s breed of customisable, risk-based AML/KYC technology capabilities allow firms to digitalise the onboarding journey and create efficient, accurate, robust and scalable processes. Automated account reviews and ongoing screening to monitor for any change in client status help firms identify, mitigate and manage fraud risk. Real-time suspicious transaction and behaviour monitoring can flag AML risks as they develop and nip them in the bud.

Automate. Streamline. Strengthen.

Every financial institution’s reputation and long-term competitiveness increasingly depends on it.

Deep Pool is the #1 investor servicing and compliance solutions supplier, providing cutting-edge software and consulting services to the world’s leading fund administrators and asset managers. Our flexible solution suite, developed by an experienced team of accountants, business analysts and software engineers, supports offshore and onshore hedge funds, partnerships, private equity vehicles, retail funds and regulated financial firms. Deep Pool is a global organisation with offices in Dublin, Ireland, the United States, the Cayman Islands and Slovakia. For more information, visit:

John Leahy
John has been with the Deep Pool Group since 2012. He drives product development, vision, strategy, and execution across a cross-functional team, serving 3 Fintech/Regtech products. John holds a Postgraduate Diploma in Product Management from Technological University Dublin.