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In November 2019, the Australian Transaction Reports and Analysis Centre (AUSTRAC) accused Australia’s second-largest bank, Westpac, of failure to implement industry standards to guard against money laundering. AUSTRAC charged Westpac with 23 million incidents of anti-money laundering (AML) violations occurring between 2013 and 2019. All told, Westpac faces nearly $7 billion in penalties—the biggest corporate fine in Australia’s history¹.

According to AUSTRAC, Westpac’s approach to guarding against money laundering amounted to ad hoc², bare-minimum efforts.  Further investigation revealed that money laundered through Westpac was being used by criminals to fund sex trafficking in the Philippines.

Money laundering inherently facilitates illicit industries, from drug trafficking to terrorism. Especially in the U.S., regulators have been aggressive and proactive in requiring due diligence and money laundering detection practices from financial institutions.

Within the U.S., financial institutions invest $25 billion³ in AML and Know Your Customer (KYC) compliance each year. Experts expect these costs to rise and take an additional 10 percent⁴ out of the average bank’s revenue by 2021.

However, even with these significant investments, criminal techniques are rapidly evolving due to the proliferation of new technologies, increasing the strain on banks to weed out bad actors.

In fact, globally, regulators fined financial institutions $27 billion⁵ for AML/KYCviolations between 2008 and 2018, $11 billion in 2015 alone. The U.S. is responsible for levying 91 percent of those fines.

Though huge financial institutions are the ones who tend to make headlines when embroiled in a money-laundering scandal, local and regional banks are most susceptible to money launderers. For community and mid-sized banks, AML penalties can range between $400,000 and $102 million. In 2018, the average penalty levied against this type of institution came in at $16.1 million⁶.

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