From the Editor: Banks in Europe Can Expect More, Larger Enforcement Actions in 2018

By Kieran Beer

Anti-money laundering related enforcement actions against financial institutions in Europe set records in 2017, and 2018 will be even worse for those on the receiving end, panelists concluded this month during “ACAMS’ 360 Degree Review: Europe’s 2017 Activities and Forecasts for 2018.”

“The prediction I’d make is that we’ll see a lot more enforcement actions taking place than in the past,” Anna Bradshaw, a partner at U.K. law firm Peters & Peters, said in response to a question about three penalties issued by the Central Bank of Ireland last year. More, More and More

What lies in wait for the financial services industry in 2017 is evidenced by ongoing reviews by regulators, including in the United Kingdom, where the Financial Conduct Authority is already mired in an unprecedented number of complex investigations that will result in punitive action, Guy Wilkes, a partner at Meshcon & Reya in London said during the ACAMS panel.

“The FCA will continue to impose huge penalties,” Wilkes said, adding that the regulator will focus more on individuals going forward and “is looking for an appropriate case to use its criminal powers.” Such a case may involve “simply the failure to conduct proper customer due diligence,” he said.

Bradshaw and Wilkes attributed the likelihood of more enforcement actions in 2018 to a number of factors, including the influence of the Financial Actions Task Force and several complementary but distinct anti-financial crime proposals by EU and U.K. lawmakers.

Recent parliamentary initiatives in the United Kingdom reflect anxiety over an upcoming mutual evaluation report by FATF, which now assigns efficacy scores that ding jurisdictions for failing to actually seize illicit assets and prosecute and convict money launderers, terrorist financiers and tax evaders.

In addition, the Fourth and Fifth Anti-Money Laundering Directives create tougher standards for EU member states, including, at least for now, the United Kingdom.

Bradshaw pointed out that Europe’s government supervisors and investigators wield more regulatory and legal authority than ever before—with even more promised. Those new powers include an ability to share previously siloed information pertaining to financial crime across borders.

A number of barriers have been removed, including those that formerly limited cross-border asset freezes, with more set to fall in both the United Kingdom and Europe despite Brexit.

(Access the webinar here).

The potential for the FCA to pursue tough penalties in 2018 follows its record-breaking, £163 million penalty in January 2017 against Deutsche Bank for facilitating fraudulent mirror trades between Moscow and London that the agency said should have been flagged and blocked by an adequate AML control framework. More

The newfound muscle of European regulators was illustrated in November, when HSBC paid €300 million to settle criminal charges brought by the National Financial Prosecutor of the Paris First Instance Court. The recently empowered unit accused the global lender of helping French nationals evade taxes. More

Though smaller than many U.S. settlements, the size of the French penalty is “shocking” and acts as “a signal to European and other countries that there is this new authority that can fine even hundreds of millions of euros,” Dan Benisty, head of compliance for Europe and Benelux, Western Union said.

“Over the past few years, especially after the memorandum of understanding with Europe in 2013, things have become very strict in Cyprus,” Gregory Dellas, Bank of Cyprus’ director of wealth and markets, said.

All of which points to Europe arguably having taken the global lead against money laundering, terrorist financing other financial crimes. The new standard not only helps keep financial markets clean, but also shows why financial institutions operating in Europe are paying more for compliance than ever before and anticipate even larger costs and penalties in the years ahead, starting with this one.
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Topics : Anti-money laundering , Counterterrorist Financing
Source: United Kingdom: Financial Conduct Authority , European Union , Ireland , France
Document Date: January 26, 2018