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Three banks demonstrate the cost of compliance mistakes

11 October 2019 |

Three banks demonstrate the cost of compliance mistakes

Compliance regulations are becoming so complex for financial institutions that it can be hard to meet all the standards required when resourcing is so costly.

But the cost of non-compliance can be even greater. Fines plus damage to reputation and the potential for customer attrition, not to mention the legal expense of an investigation, make the actual cost hard to quantify.

The following financial organizations had considerable compliance resources in place to meet regulations but still fell short and made costly mistakes. This is where a digital workforce completing manual tasks with accuracy and freeing up compliance staff to work on the more complex cases can make a real difference.

ABN Amro

At the time of writing, Dutch bank ABN Amro is being investigated for money laundering. Money laundering is of particular concern in The Netherlands where it’s estimated that about 13 billion Euros have been laundered through the country over a ten-year span.

Prosecutors have alleged that ABN Amro didn’t report suspicious transactions in a timely fashion if at all, and that it did not properly investigate client behaviour or sever ties with clients they suspected were doing illegal activity.

The compliance mistakes were identified when the Dutch Central Bank ordered a review of ABN Amro’s retail clients for possible money laundering or other criminal activity.  This was despite the bank already having increased its anti-money laundering operations and dedicating over 1,000 staff to it at a cost of nearly 200 million Euros following a $900 million fine that was imposed on ING in 2018.

When the investigation was made public, ABN Amro shares were down 9.9%.


Standard Chartered Bank

In April 2019 the Financial Conduct Authority (FCA) fined Standard Chartered Bank £102.2 million for poor anti-money laundering controls. This was the second highest fine ever imposed by the FCA for AML non-compliance.

The FCA investigated two high risk areas of the bank’s business – the UK wholesale correspondent banking business and its branches in the United Arab Emirates.

Failings were identified in controls around customer due diligence and ongoing monitoring. The UK bank had failed to establish and maintain risk-sensitive policies and procedures, whilst also failing to ensure that its UAE counterparts were held to the same AML compliance and counter-terrorist standards.

According to the FCA, the bank is working to improve its AML controls to ensure all the issues are fully addressed and avoid future breaches, at a significant resource cost.

Read the full FCA case story here

Bank of Scotland

Even something as simple as a failure to report suspicion of fraud can result in a hefty fine. In June 2019 Bank of Scotland was fined £45.5 million for just this.

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said of the case:

‘Bank of Scotland failed to alert the regulator and the police about suspicions of fraud at its Reading branch when those suspicions first became apparent.​​​​​ BOS’s failures caused delays to the investigations by both the FCA and Thames Valley Police. There is no evidence anyone properly addressed their mind to this matter or its consequences. The result risked substantial prejudice to the interests of justice, delaying scrutiny of the fraud by regulators, the start of criminal proceedings as well as the payment of compensation to customers.’

Following an independent review of the cases of customers who may have been affected, it was estimated that the total compensation due to these customers could be up to £115 million.

Read the FCA case story here.

What can Intelligent Automation do to help?

Financial services institutions need all the help they can get in order to drive down costs and reduce risk. It's important that compliance staff have enough time to investigate and report suspicious clients or activity without being hindered by needing to complete time consuming manual processes. Whilst there is no all encapsulating solution to meeting your regulatory obligations— Intelligent Automation can certainly help. From resourcing to risk, Intelligent Automation can either part or fully automate a variety of processes in your day-to-day compliance.


Download our latest Ebook to learn more about how Intelligent Automation can help you 

KYC and AML: Your essential guide to Intelligent Automation in Finance Compliance



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