Global enforcement fines rise to $5.65bn in Q3 2023
Global enforcement fines increased to $5.65 billion in Q3 2023, up by 30% since the start of the year, according to a new report released by Corlytics.
Image source: Corlytics
The first two quarters of this year saw global enforcement fines amount to $1.5 billion and $2.27 billion, respectively.
For the third quarter, the bulk of the fines came from US regulators, accounting for 85% of the total global fines. Recent examples include the US Securities and Exchange Commission (SEC) handing a $25 million penalty to Deutsche Bank subsidiary DWS Investment Management Americas for anti-money laundering violations and “ESG misstatements”.
In August, the SEC also charged 11 Wall Street firms for the use of off-channel communications such as WhatsApp by employees, issuing a total of $289 million in fines.
In terms of areas of regulatory focus, the report highlights risk management deficiencies, with a notable example being UBS Group and Credit Suisse paying around $388 million in relation to its dealings with Archegos Capital Management.
“Financial crime and corporate governance continue to be the two categories where most enforcement activity took place, with fines for fraud, money laundering and terrorist financing going up and topping the list of enforcement action in this category,” the report states.
“Regulators highlight the importance of having adequate AML systems and controls in place to be able to address the growing threat and sophistication of money laundering.”
Areas of growing focus include failures in culture, conduct and ethics, with the report noting that while this is not at the top of the list for regulators, it has been receiving more attention in recent years. In July, the US Consumer Protection Financial Bureau (CFPB) fined Bank of America $140 million for violating conduct of business rules.
“In regulatory monitoring, teams spend 75% of their time reading irrelevant regulatory updates. That is 75% of the time that could be spent on value-add tasks,” says Evgeny Likhoded, president at Corlytics.
Likhoded was previously founder and CEO of UK-based regtech Clausematch, which was acquired by Corlytics in July for an undisclosed sum.
“On the other side, creating an effective compliance program is challenging due to the complexity of the regulatory environment and the use of outdated tools or even the lack of tools at all,” he adds.
“Enforcement actions highlight that firms are still struggling with those challenges and it is vital to use technology to strengthen regulatory compliance and change management.”
