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Money laundering and trade sanction breaches have cost European banks dear

Publication Date: 03 Apr 2019 - By Gaurav Sharma (Associate Editor ReachX) By Gaurav S.

Equity Fundamental Equity UK EU Financial Services


European banks have suffered heavy financial, operational and reputational damage for alleged money laundering and trade sanction breaches, and face even further risk as investigations continue, according to an industry report. 

In a note to clients, rating agency Moody’s said European banks were fined over $16bn from 2012 to 2018 related to the alleged breaches. 

"In some cases, supervisors have offered banks deferred prosecutions in exchange for a period of additional regulatory oversight, during which they must improve their risk and governance frameworks," said Sean Marion, Managing Director at Moody's. 

"This usually entails sustained large-scale investment in their compliance and operations functions, which although credit positive can hit profitability."

More than 75% of the fines were levied by US regulators. 

The US is now investigating Danske Bank, which admitted some failures in the anti-money laundering (AML) controls of its Estonia branch. Swedbank is also being investigated for some weak AML controls at Baltic operations, and preliminary investigations are ongoing at other Nordic banks. 

Italy's central bank has also found shortcomings in AML processes of ING Italy. European regulators are now imposing larger penalties than previously, as shown by the Dutch $915m fine against ING Groep in September. 

New rules such as the European Union's updated Anti-Money Laundering Directive are designed to reduce the likelihood of large penalties by encouraging banks to set up better controls.

Although most fines have been lower than the affected banks' annual pre-tax earnings, they remain a costly threat, posing financial, operational, and reputational risks, Moody’s concluded


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