Compliance fines and regulatory lapses continued to bite financial services firms hard in 2022.  

The Financial Conduct Authority (FCA), the industry watchdog, posted over £215 million worth of fines on its website for 2022. Santander received the biggest fine of the year – £107 million for poor anti-money laundering controls over a period stretching from 2012 to 2017.

“Santander had ineffective systems to adequately verify the information provided by customers about the business they would be doing,” the FCA said. “The firm also failed to properly monitor the money customers had told them would be going through their accounts compared with what actually was being deposited.”   

Santander undertook wide-ranging restructuring of its processes and did not contest the findings.

Global issue

Regulators fined banks and financial institutions around $5 billion in 2022 for breaching anti-money laundering rules, breaking sanctions and for failures in their know-your-customer rules, according to a report in the Financial Times.

Experts worry that a trend to reduce financial crime following the 2008 financial crisis is reversing.  While firms do invest in compliance following a fine from regulators, the effects are often weak and short-lived. “Remediations could be quite poorly enforced and monitored within the firm and by the regulators themselves,” Huw McCartney, a professor at the University of Birmingham, told the paper.

Data failure

European banks often fail to manage key customer data and perform due diligence, a report by Thomson Reuters said last year. The report said that too many organisations still use basic spreadsheet tools to manage financial crime risk – something the FCA refers to as using manual processes.

“Firms are unable to track clients effectively in a spreadsheet for AML and KYC purposes, and spreadsheets are not conducive to tracking changes in client behaviour or bringing any consistency to continuing due diligence,” the report said. “Yet few banks have invested in workflow technology that could bring more consistency and assurance to client on-boarding, continuing due diligence and client management, particularly when it comes to high-risk clients.”