More regulatory fines against banks on the way - Wolfsberg Group

Banks that thought the epoch of record-setting regulatory fines was drawing to a close should think again: there’s plenty more to come, a representative from the Wolfsberg Group said at a conference in Singapore on Wednesday.

“I’m not holding my breath to see any less fines anytime soon,” said Markus Schulz, a representative from the group, an association of 13 of the world’s biggest banks that seeks to develop guidelines on financial crime.

Schulz was speaking at Sibos, a global conference put on by the financial infrastructure organisation SWIFT.

Over the past three years, regulators have dished out several multi-billion dollar fines to some of the world’s largest financial institutions, many of which are part of Wolfsberg.

Schulz’s dour tone on the near term for banks and the massive fines hanging over their heads comes from the time – most likely years - it will take for new compliance systems and checks to begin stemming money laundering and terrorist finance infringements.

The so-called “capital punishment” hitting banks today are often connected to cases that occurred more than five years ago.

“A lot of the fines you see now are not because of misconduct last month,” Schulz said. “You need to keep in mind that the environment we run today will only really yield the value and show robustness in the coming years.”

In a landmark case last year, BNP Paribas was fined nearly US$9 billion for violating United States sanctions. It was one in a series of cases that have cost banks billions.

In response to the threat of fines, banks have rolled out massive regulatory and compliance campaigns that have become the fastest growing cost for many such institutions.

While cutting staff worldwide, banks such as HSBC and Standard Chartered have greatly boosted a growing legion of compliance officers they hope will some day reduce regulatory fines.

Eventually, these expensive initiatives should help lower the amount of fines, Schulz noted. But at the current rate, banks will simply not be able to keep up with skyrocketing compliance costs. Consumers stand to feel the brunt of the impact.

“Banks just can’t absorb all those costs. Eventually you will need to transfer those to the customer,” he said.