Financial Institution Penalties Issued by US Regulators Reach $3B: Fenergo Report

Fenergo, the provider of digital solutions for client lifecycle management (CLM), released its annual findings on US-issued financial institution fines.

The study, which analyzed year-over-year (YoY) penalties levied by US financial regulators, revealed “that the total value of penalties issued rose 151% YoY; that US crypto financial institutions were a substantial contributor to the overall increase; which US regulators issued the most penalties, and for what infractions; plus, much more.”

US-Issued Penalties Reach $3 Billion in 2022

Fenergo’s deep dive discovered “that the total value of penalties issued by US regulators rose 151% YoY, reaching $3 billion ($3,002,969,793) in 2022 – compared to just under $1.2 billion ($1,195,519,043) the previous year.”

Additionally, in 2022, the United States levied “just 10% of the total anti-money laundering (AML) and regulatory fines issued globally, though the US also issued penalties of the most notable value.”

$1.4 Billion: The Heaviest Fine Issued in 2022

Fenergo’s analysis revealed “that the largest US penalties in 2022 were issued to Denmark’s biggest bank, with fines totaling $1.4 billion ($1,387,600,000).” Those fines were levied by the US Securities and Exchange Commission (SEC) and the US Department of Justice (DOJ), respectively, “for defrauding US lenders in relation to AML measures in the bank’s Estonia branch.”

The DOJ and Commodity Futures Trading Commission (CFTC) levied the most significant penalties from US regulators “in 2022, issuing fines each worth over $1 billion for AML and Combating the Finance of Terrorism (CFT) violations.” The Office of Foreign Assets Control (OFAC) issued the highest number of enforcement actions “for AML and CFT violations of all US regulators.”

Penalties Issued to Crypto Financial Institutions Spike 89% YoY

Fines on US crypto financial institutions and their employees also “contributed to this year’s increase, with fines reaching $189,642,987 million, an 89% YoY increase when compared to 2021,”according to Fenergo’s analysis.

This year’s enforcement actions “included the SEC’s $100 million fine on BlockFi for violations of registration and antifraud provisions; OFAC’s and FinCEN’s fine on Bittrex for $29,280,829 for AML violations; and the New York State Department of Financial Services (NYDFS)’s $30 million fine on Robinhood for failure to maintain Bank Secrecy Act (BSA), AML, and cybersecurity compliance.”

Rory Doyle, Financial Crime Policy Manager at Fenergo, said:

“The sharp rise in enforcement action against crypto firms can be attributed to the fact that their regulatory infrastructures and internal cultures have yet to reach the same level of maturity as the more established financial institutions. We expect more of the same this year as the regulators look to deter financial crime and the crypto industry attracts mounting regulatory scrutiny. Recent high profile enforcement actions, such as the Coinbase penalty of $100M issued by the NYDFS just weeks ago, are a case in point and reinforce the value of regulatory governance and prudent financial oversight, which helps deter illicit behavior that in the long term negatively impacts the financial system.”

Fines to Individuals Increase Almost 90% YoY

Fenergo revealed “that fines to individuals increased 89% YoY, jumping from $16,505,264 in 2021 to $31,209,191 in 2022.”

The study found that this was largely “a result of crypto-related fines. The largest individual fines were issued by the Commodity Futures Trading Commission (CFTC) to three co-founders of BitMEX, totaling $30 million for AML and other violations.”

Doyle added:

“Our data shows that more needs to be done in this region to encourage effective client due diligence for KYC and enable a greater cross-border approach to combatting financial crime. Harnessing technology and data that informs and can be acted upon will help prevent financial crime and, ultimately, reduce the risk of enforcement action,”

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