In 2019 across the US and the UK AML fines totalling nearly £3 billion were handed out by regulators. In the estate agency markets notably Purple Bricks was fined £266,973 for AML failings following a £215,000 fine to Countrywide for similar breaths in 2019. It is clear that regulators are taking these breaches seriously, and to a small firm the fines could put you out of business.
Regulators are clearly indicating that it is time for regulated firms to get their houses in order. Considering the National Crime Agency estimates money laundering is costing the UK economy £37 billion a year it is understandable that government is putting pressure on regulators to get on top of the problem.
Themes
Considering the failures that are being reported some themes are clear. It is very rare that a firm is wilfully negligent, or even criminal. In the overwhelming number of cases some effort has been made to do the right thing. Employees on the four line are very rarely negligent. Rather, they will follow the procedures as set out by their organisation, absorbing the corporate culture. If those at the top either don’t have policies to combat money-laundering or are weak in their implementation of the procedures then staff will follow suit.
Failings often happen due to lack of adequate training or compliance managers checking what is happening on the ground. This means mistakes get missed until the regulator makes a visit. Staff often see AML procedures as a ‘block to business’ and so take short cuts in the interest of ‘getting the deal done’. Without firm management from the top these failing soon become part of the culture.
Across industries regulators have noted common themes:
Penalties For Non-Compliance
Needless to say with regulators keen to take enforcement action fines will get larger and more common place. HMRC states that its fine must be proportionate to the breach and deter non-compliance. How do they set the fine?
HMRC will consider:
- The reason for the breach
- The Seriousness of the offence committed
- The compliance history of the firm
- The business’s size
- The size of benefit the firm gained from the breach
- The amount of exposure to money laundering activity
The firm is liable to a £1,500 penalty administration fee along with any fine issued, not to mention the 2 years potential prison sentence for serious breaches. However, if a firm discovers a breach themselves and then reports this to HMRC unprompted HMRC will consider a reduction in any potential fine. A reporting firm should also tell HMRC what, if any, remedial action they have taken.
The actions taken from regulators send a clear message to all regulated firms. Create a culture of compliance enforced from the top or you will be fined, and your reputation damaged.
It is your responsibility to get on top of the regulations, and the methods money launderers use to exploit your business.
How LondonCDD can help:
- Review your firms risk assessment
- Produce your Policy, Controls & Procedures
- undertake your transaction risk assessment
- Complete client due diligence
- Provide full AML training to your team
- Provide a fully out-sourced AML due diligence solution
