Sanctions and fines

September 5, 2018 3 minute read

Summer is over – Sanctions and fines 

Societe Generale announced this week they have set aside $1.27 billion to finally settle an allegation by US authorities that they violated sanctions. The case, which has been ongoing for over a year involves transactions carried out in Libya. The potential fine may appear staggering but in reality, it will likely have little impact on the bank. SocGen has been budgeting for the fine for some time.

SocGen, may have minimized the impact of their fine but other banks may not be so prepared. Standard Chartered is likely to receive an eye-wateringly large fine this year for breaching US sanctions on Iran. Given the current sensitivity between the two countries and the bank’s history of fines for similar violations, it would not be unreasonable to expect that the bank will be made an example of. Dutch lender, ING felt the wrath of the regulator also this week when it received a considerable fine of €775 million for prolonged failures to comply with AML legislation. The bank has said that senior executives will have to forgo their bonuses for 2018, potentially a much more effective way of encouraging financial crime compliance.

5MLD in pictures and what’s next for the European Union?

The EU’s Fifth Money Laundering Directive will come into force on the 10th January 2020. Although over a year away, firms need to start thinking about what impact this will have on their compliance processes. On Monday, we published an infographic on some of the biggest changes that the directive will introduce. From cryptocurrency exchanges to auction houses, 5MLD will shake up the status quo and address a range of risks from emerging technologies and new threats.

The implementation and execution of 5MLD will not however, mean that the EU can put its feet up. Since writing the fifth directive the EU has been hot on the heels of states who are yet to comply with the Fourth Money Laundering Directive, fines for which should be expected soon. The EU is also closely pursuing the issue of Russian and other corrupt monies being laundered through ECB licensed banks most notably in Malta, Estonia and Latvia. Finally, the EU has also recently refocused some of its financial crime efforts on tax evasion and transparency. Learnings from last year’s PANA committee have been digested and an investigation into the due diligence requirements of golden visa schemes has been launched. With so many financial crime issues on the EU’s agenda, the Fifth Money Laundering Directive is unlikely to be the only piece of financial crime legislation making a splash in the near future.

Spreading itself too thin? The UK’s financial crime pledges 

The British government may be serious about fighting organized crime but is it spreading itself too thin? Last week, Theresa May announced a brand new aid package for Africa designed to stop “dirty money in its tracks” and to recover some of the millions of dollars worth of assets lost each year by the continent. The package will set up “centres of excellence” to more effectively tackle financial crime and be used to support capacity-building initiatives to ensure that states can investigate and prosecute crimes properly. All of which must be welcome news to a continent that loses over $50 billion a year to illicit financial flows.

The initiative, which was then echoed by US authorities who announced a similar package, received mixed reviews. It was commented that although well-intentioned, the UK has enough problems at home to deal with before it starts trying to solve others’ abroad. Which is true, the extent of the UK’s problem is huge and set at around £90 billion a year. Changes are coming – this week UK announced that the much anticipated Economic Crime Centre will open this Autumn. This centre, which will sit within the UK’s NCA, should give a considerable boost to the UK’s ability to combat financial crime at home and potentially one day the learnings from it can be used abroad.