Report findings show major EU banks are at the mercy of US regulators when it comes to fines, regulations and eCrime while operating in the US.
Risk-data and regulatory-risk intelligence firm Corlytics has produced telling findings from a report on eCrime enforcement. Banks operating outside of their originating jurisdiction are at the mercy of US regulators.
According to the Corlytics Barometer report, which spans from January 2012 to June 2017, UK, French, German and Swiss banks, with operating branches in the US, have paid almost 40% of fines related to economic crime in the United States.
“Economic crime” falls under criminal acts committed by institutions and the senior individuals therein. This has had an impact on European and Asian regulators, too, as criminal convictions of the sort are on the rise in the UK, Hong Kong and Australia.
This crime is analysed under major categories such as fraud, Anti-Money Laundering or Bank Secrecy Act (AML/BSA) rules, sanctions, tax evasion, bribery and misappropriation.
$1.77 in every $5 was accounted for in crimes involving sanctions. However, this has decreased from 2009 figures which showed $2 in every $5.
The top 10 European banks have paid $13.25 billion to US regulators since 2012 – accounting for 35% of total payments of fines to US regulators – seeing a ruthless squeeze from American regulators enforcing 10-times the US average for fines on their EU counterparts.
In the period of this report, economic crimes made up 18% of all regulatory enforcement fines (927 cases total).
John Byrne, CEO of Corlytics, said: “What’s most noticeable across all regulatory categories is the extent to which large fines have decreased. Regulators are 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.
“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.
“The NYDFS (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.”