Updated: Aug 12
On Friday, May 20th, a US district judge sentenced Arthur Hayes, cofounder and former CEO of the BitMEX cryptocurrency exchange, to two years of probation for allowing customers to use the platform to sidestep anti-money laundering (AML) rules. This was considered a lucky break for Hayes because he might have been sentenced to as much as five years of prison time, according to an article on CoinGeek.
Hayes’s sentencing was only the latest shoe to drop in terms of violations and penalties for BitMEX. Earlier this year, Hayes and two other BitMEX cofounders, Benjamin Delo and Samuel Reed, each were required to pay $10 million fines after they pled guilty to violating the US Bank Secrecy Act.
Fines levied against BitMEX underscore an important trend: regulators are actively assessing penalties for running afoul of BSA/AML rules and the penalties can be quite stiff.
Trends in BSA/AML Enforcement
In its spring 2022 report on money laundering enforcement trends, law firm Miller & Chevalier pointed out that “money laundering enforcement and regulation have been in the spotlight in many regions around the world. Signs point to this trend continuing….” The law firm also noted that “U.S. regulators have been very active in their AML efforts.” 
One reason for a rise in enforcement actions is the Covid-19 pandemic, which has spurred increases in fraud and ransomware attacks. Money obtained through these illegal activities is often made to look legitimate by “laundering” profits through cryptocurrency operations and even well-established banks and credit unions.
According to Forbes magazine, financial institutions lacking compliance and due diligence faced $2.7 billion in AML fines in 2021. While the total dollar amount of AML fines fell from $3.2 billion in 2020, the number of institutions that were fined increased dramatically. In 2020, only 24 institutions were fined, while in 2021 the number rose to 80.
Following are two cautionary tales. In 2021, Capital One failed to guard against money laundering and was fined $390 million by the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) for violations of the Bank Secrecy Act. This came after the regulator had issued warnings that went unheeded.
In addition, in March 2022, USAA Federal Savings Bank was ordered to pay $140 million for failures in maintaining its BSA/AML compliance program. Consent orders were reached with FinCEN and the Comptroller of the Currency.
Some of the largest penalties have been meted out to very well-known financial institutions, but this is not always the case. On December 16, 2021, for instance, FinCEN announced that Community Bank of Texas had incurred $8 million in civil penalties for BSA violations.
A Fresh Angle on Compliance
Community banks and credit unions are facing a rapidly-changing financial environment as interest rates rise and inflation hits its highest levels in decades. Remaining profitable in such an environment can be tricky.
Even if your institution is unlikely to grab headlines with a BSA/AML compliance fine, strong controls still represent a growth opportunity. Some banking experts suggest that putting in place robust compliance controls could arguably aid in profitability because banks that face BSA/AML fines find it very hard to make up for such large financial hits with other activities.
Not only are regulatory penalties a threat to profitability, but so are losses due to fraud and to litigation arising from improper controls. With incidents of fraud growing in frequency and in complexity, the best defense for community banks and credit unions often is having strong compliance measures in place to guard against problems that could erode profitability, going forward.
 https://coingeek.com/aml-averse-bitmex-co-founder-arthur-hayes-dodges-prison-time/  https://www.millerchevalier.com/publication/money-laundering-enforcement-trends-spring-2022  https://www.forbes.com/sites/forbestechcouncil/2022/03/24/lessons-from-the-seven-largest-aml-bank-fines-in-2021/?sh=54f437778ced  https://www.kyckr.com/aml-fines-2021/  https://www.complianceweek.com/regulatory-enforcement/usaa-fined-140m-for-aml-compliance-failures/31475.article  https://www.millerchevalier.com/publication/money-laundering-enforcement-trends-spring-2022