Europe’s banks paid ‘disproportionate fines’ to US regulator: report

Europe’s banks have paid a disproportionate share of the fines levied by the United States’ regulators, “with the average fine for European banks being ten times the amount US banks have been served”, data contained in a new report shows.

The report, by Dublin-based regulatory risk intelligence provider Corlytics, shows 97% of the US$38.4bn in fines levied by global regulators since January 2012 have been served by US regulators. And of this amount, Europe’s top 10 banks have paid US$13.25bn, the Corlytics data reveals.

It also shows that UK, French, German and Swiss banks with branches in the US have paid almost 40% of the fines related to economic crime in the US.

On the brighter side, although the number of fines have increased over the last 12 months, the average value of each fine has been decreasing, according to Corlytics.

“This is due in some part to a few very large fines issued by the US regulators, predominantly the Office of Foreign Assets Control, in 2014,” the Corlytics researchers noted, in a summary of their findings. They added that these fines “were mainly for sanctions and anti-money laundering and Banking Secrecy Act (AML/BSA) breaches”.

Another trend they cite has been an increase by regulators in the UK, Hong Kong and Australia in enforcement actions that target individuals, with criminal convictions and imprisonment.

Regulators increasingly ‘satisfied’ 

Corlytics chief executive John Byrne, pictured left, said that the decrease in the size of the fines being levied for economic crimes suggested that regulators were “beginning to indicate that they are satisfied that financial institutions seem to be addressing economic crime, and may have moved their focus to other regulatory categories for the time being”.

However, he added that this didn’t mean regulatory scrutiny wouldn’t return, particularly as the the regulations governing banking, bank-secrecy, anti-money laundering and similar crimes continue to increase globally.

Large European financial institutions with a presence in North America need to be extremely careful to ensure that they comply, he warned, for there is clear evidence to suggest that they will be treated harshly if they do not – with the senior managers who preside over compliance issues increasingly in the regulators’ cross hairs.

“Our data suggests the increased penalties, both financial and non-financial, ensure that senior managers of large financial institutions need to be in full control of the institution’s compliance posture.

“In relation to financial crime, the future area that organisations need to be most aware of is cyber-security.

“The [New York State Department of Financial Services] regulations have come into effect and this regulator, even though it’s a state regulator rather than a federal one, has been known to penalise heavily when its regulations are breached. Financial institutions need to ensure that they fully understand their risk exposures in this area.”

To download a copy of the 13-page Corlytics report,  click here. 

ABOUT THE AUTHOR
Helen Burggraf
Helen Burggraf is the editor of International Investment. A US-trained journalist, she has worked in Rome, New York City and London, covering everything from the fashion and retailing industries to the global drinking water and water-treatment sector, private equity, and most recently, the international cross-border financial services/advice industry.

Read more from Helen Burggraf

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