It’s a tough time to be a financial institution, especially in the developed world. Not only do banks and other financial services organizations have to face the heightened threat of sophisticated cybercriminals breaking into their vaults, but they also have to contend with unprecedented regulatory pressure to keep dirty money dealers at bay.
2018 witnessed some landmark rulings with banks that were found guilty of failing or, in some instances, willfully failing to comply with the requirements laid out in the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) handed near-record fines and penalties.
BSA/AML requires banks and related financial institutions to, among other things, demonstrate the ability to detect activity that’s indicative of money laundering, terrorist financing and other related crimes and report such activity to the Department of Treasury. Money laundering is a particularly egregious crime, with shady transactions reaching as much as $2 trillion a year according to estimates by the United Nations Office on Drugs and Crime (UNODC).
Banks that sleep at the wheel or simply lack strong management or reporting structure risk being slapped with hefty fines and in some cases jail time for those found guilty of directly abetting these crimes. Related: Will Russia Be Left Holding The Bag If Maduro Is Ousted?
Here are some of the most memorable cases of senior bankers not doing nearly enough to stop money laundering schemes—and facing the full wrath of the law.
JPMorgan’s $2.05 billion court settlement in 2014 will go down as one of the harshest in the history of the banking industry—and for good reason. For 15 years or so, the giant bank blatantly ignored red flags surrounding Wall Street financier Bernard Madoff’s fraudulent dealings. Madoff used his accounts at the bank to run a massive $65 billion Ponzi scheme, easily the largest ever uncovered in U.S. territory.
One of Europe’s largest banks, HSBC Holdings was also caught napping at the wheel and failing to detect suspicious activity. The bank was found guilty of failing to monitor $670 billion in wire transfers that allowed Mexican and Colombian drug cartels to launder their ill-gotten proceeds.
Germany’s fourth-largest bank by total assets is not a stranger to controversy when it comes to money laundering activity. According to a consent order with the New York Department of Financial Services, Commerzbank was found guilty of failing to share relevant information surrounding $250 billion-worth of fraudulent transactions conducted on behalf of Iranian and Sudanese entities subject to U.S. sanctions between 2002-2008.
#4 Standard Chartered
One of the UK’s largest and most prestigious multinational banking institutions might just end up winning the ignominious title of one of the world’s most lucrative money laundering havens. In 2012, the bank was forced to cough up $667M in fines for violating U.S. sanctions against doing business with Iran. Two years later, StanChart was slapped with an additional fine of $300 million for the bank’s weak anti-money laundering controls. Apparently, that was merely the beginning of the bank’s troubles. Last year, reports emerged that the bank could face another $1.5B in extra fines for the same crime, which could take total fines somewhere in the vicinity of $2.5B.
#5 ING Group
Perhaps you have noticed a recurring theme that the most elaborate money laundering schemes are conducted at some of the world’s largest financial institutions. This clearly shows that lack of adequate monitoring structures is an industrywide problem and not just underfunded organizations. In 2018, Netherlands-based ING Group, one of the world’s largest banking and financial services companies, was fined $900M by the Dutch authorities after it acknowledged ‘‘serious shortcomings’’ for failing to prevent illicit payments being made by VimpelCom to a company owned by an Uzbek government official (VimpelCom is a Russian telecom that is now called VEON).
#6 Commonwealth Bank of Australia
In June 2018, CBA made history for all the wrong reasons after paying the biggest civil penalty in Australian corporate history after admitting to not 1, 5, 10 or 20 but a staggering 53,000 breaches of money laundering laws that allowed drug syndicates to funnel millions in dirty cash to offshore accounts.
#7 Deutsche Bank
Banks with international operations not only have to comply with strict AML laws back home but also on foreign soil. And, sometimes money laundering can take an unfamiliar face. In 2017, Deutsche Bank was found guilty by UK authorities of condoning a series of illegal mirror trades through its Moscow office that allowed Russian nationalities to expatriate funds from their country by purchasing shares at home using rubles then selling them in London using euros or dollars.
By Alex Kimani for Safehaven.com