Regulators Slapped Industry with Record Fines in 2022, SEC in the Lead

by Damian Chmiel
  • WhatsApp crackdown amounted to fines of $1.1 billion.
  • Also, European regulators imposed high penalties although visibly lower than the SEC.
Fined, nfa
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2022 saw an unprecedented surge in fines issued by global financial services regulators, according to SteelEye's Fine Tracker. Its newest report analyzed financial penalties imposed by five key regulators showing that the overall amount of fines exceeded $7 billion.

SteelEye's inaugural Fine Tracker analyzed financial penalties issued by the US Securities and Exchange Commission (SEC), the British Financial Conduct Authority (FCA ), the French L'Autorité des Marchés Financiers (AMF), the German BaFin and the Federal Office of Justice (FoJ).

The SEC Dominates Competition, WhatsApp with a Huge Penalty

SEC fines regulators

The US SEC led the way in penalties, with a record $6.4 billion in fines issued, which included a $1.1 billion fine resulting from its crackdown on WhatsApp. A total of 16 Wall Street giants were fined for failing to adequately monitor their employees' behavior and prevent them from using unauthorized instant messaging to exchange confidential information.

"These communication channels are becoming ubiquitous in certain markets, and yet SteelEye's 2022 Compliance Health Check report, which surveyed 170 senior compliance professionals in financial services, found that just 15% of firms are monitoring WhatsApp," Brian Lynch, the President of SteelEye Americas, explained.

According to SteelEye's data, even fewer monitors Slack (9%) and Signal (3%). Regarding the most popular communicators, there is a lot of work to be done: in the case of Microsoft Teams, only 40% of investment and financial firms monitor this platform and 25% monitor Zoom.

The $6.4 billion in penalties imposed by the SEC is a new record and is almost double the $3.9 billion in 2021. Although the number of enforcement actions was smaller than in the years before the pandemic, 2022 saw a 9% increase over the earlier year.

"I continue to be impressed with our Division of Enforcement. These numbers, though, tell only part of the story. Enforcement results change from year to year. What stays the same is the staff's commitment to follow the facts wherever they lead," Gary Gensler, the SEC Chair, said.

Allianz Global Investors US LLC (AGI US) had to pay more than $1 billion in connection with an allegedly fraudulent scheme that concealed the risks of a complex options trading strategy called 'Strucuted Alpha'. Around 114 institutional investors purchased the strategy from AGI US, and billions of dollars were lost due to its misconduct.

Watch the recent FMLS22 panel discuss "Regulation Roundup: Everything You Need to Know for 2023."

Financial Penalties in Europe

Meanwhile, the FCA saw a marked increase in fines issued in 2022, with 26 compared to 10 in 2022. However, the total value of these fines decreased from £567.77 million in 2021 to £215.83 million in 2022. The highest penalty had to be paid in December 2022 by Santander UK for failing to properly oversee and manage its AML systems for almost five years.

Between 2020 and 2022, the FCA imposed almost £1bn in fines, 43% related to inadequate compliance with governance and control regulations.

"There remains a lot of work to be done by financial services firms to ensure they do not fall short of their obligations. As regulators get more aggressive in their enforcement action, firms need to really think about how robust their compliance programs and policies are. Particularly against the backdrop of recession fears, pressure to perform is mounting. With that, firms of all sizes are putting de-risking strategies in place," Matt Smith, the CEO and Co-Founder of SteelEye, said.

Germany's financial regulators, BaFin and FoJ, imposed 46 fines in 2022, the majority being due to reporting delays. The penalties totaled €24.61 million. On the other hand, France's stock market regulator fined companies a total of €95 million, including a single fine of €75 million for violations of professional obligations.

The Dutch AMF issued only three fines, all of which were related to money laundering and amassed to €903,000.

2022 saw an unprecedented surge in fines issued by global financial services regulators, according to SteelEye's Fine Tracker. Its newest report analyzed financial penalties imposed by five key regulators showing that the overall amount of fines exceeded $7 billion.

SteelEye's inaugural Fine Tracker analyzed financial penalties issued by the US Securities and Exchange Commission (SEC), the British Financial Conduct Authority (FCA ), the French L'Autorité des Marchés Financiers (AMF), the German BaFin and the Federal Office of Justice (FoJ).

The SEC Dominates Competition, WhatsApp with a Huge Penalty

SEC fines regulators

The US SEC led the way in penalties, with a record $6.4 billion in fines issued, which included a $1.1 billion fine resulting from its crackdown on WhatsApp. A total of 16 Wall Street giants were fined for failing to adequately monitor their employees' behavior and prevent them from using unauthorized instant messaging to exchange confidential information.

"These communication channels are becoming ubiquitous in certain markets, and yet SteelEye's 2022 Compliance Health Check report, which surveyed 170 senior compliance professionals in financial services, found that just 15% of firms are monitoring WhatsApp," Brian Lynch, the President of SteelEye Americas, explained.

According to SteelEye's data, even fewer monitors Slack (9%) and Signal (3%). Regarding the most popular communicators, there is a lot of work to be done: in the case of Microsoft Teams, only 40% of investment and financial firms monitor this platform and 25% monitor Zoom.

The $6.4 billion in penalties imposed by the SEC is a new record and is almost double the $3.9 billion in 2021. Although the number of enforcement actions was smaller than in the years before the pandemic, 2022 saw a 9% increase over the earlier year.

"I continue to be impressed with our Division of Enforcement. These numbers, though, tell only part of the story. Enforcement results change from year to year. What stays the same is the staff's commitment to follow the facts wherever they lead," Gary Gensler, the SEC Chair, said.

Allianz Global Investors US LLC (AGI US) had to pay more than $1 billion in connection with an allegedly fraudulent scheme that concealed the risks of a complex options trading strategy called 'Strucuted Alpha'. Around 114 institutional investors purchased the strategy from AGI US, and billions of dollars were lost due to its misconduct.

Watch the recent FMLS22 panel discuss "Regulation Roundup: Everything You Need to Know for 2023."

Financial Penalties in Europe

Meanwhile, the FCA saw a marked increase in fines issued in 2022, with 26 compared to 10 in 2022. However, the total value of these fines decreased from £567.77 million in 2021 to £215.83 million in 2022. The highest penalty had to be paid in December 2022 by Santander UK for failing to properly oversee and manage its AML systems for almost five years.

Between 2020 and 2022, the FCA imposed almost £1bn in fines, 43% related to inadequate compliance with governance and control regulations.

"There remains a lot of work to be done by financial services firms to ensure they do not fall short of their obligations. As regulators get more aggressive in their enforcement action, firms need to really think about how robust their compliance programs and policies are. Particularly against the backdrop of recession fears, pressure to perform is mounting. With that, firms of all sizes are putting de-risking strategies in place," Matt Smith, the CEO and Co-Founder of SteelEye, said.

Germany's financial regulators, BaFin and FoJ, imposed 46 fines in 2022, the majority being due to reporting delays. The penalties totaled €24.61 million. On the other hand, France's stock market regulator fined companies a total of €95 million, including a single fine of €75 million for violations of professional obligations.

The Dutch AMF issued only three fines, all of which were related to money laundering and amassed to €903,000.

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