5 billion SEK issued in fines for KYC shortfalls

Government agencies crackdown on KYC and AML breaches

Money laundering and associated regulations are always hot topics, though perhaps now more so than ever. With efforts towards more centralised control high on the agenda at the EU level. Therefore, preparation is key to avoiding being targeted by government agencies for breaching regulations. We can already see a huge increase in the number of money laundering-related cases handled by both the Swedish Financial Supervisory Authority, and Stockholm’s County Administrative Board.

FI issues 5 billion SEK in fines

The number of published sanction decisions published by the Swedish finansinspektionen (FI), increased by 6 times between 2019 and 2020. Furthermore, In 2020, more than 5 billion SEK in sanctions were issued to banks and companies under the FI’s supervision.

The Administrative Board supervises specific businesses under the Money Laundering and Terrorist Financing Prevention Act. Their work focuses heavily on the supervision and inspection of companies and the implementation of procedures against unregistered businesses. The County Administrative Board supervises a growing number of organisations covered by the Money Laundering Directive. Similarly, the growing number of organisations correlates to the number of decisions that have been made.

Companies struggle to meet the requirements of complex regulations

Many of the County Administrative Board’s interventions are against companies in industries that historically may not have had to consider their KYC or customer due diligence procedures and processes (such as art galleries, auction houses, artists and associated re-sellers). At least not to the same extent as their previously regulated counterparts. This, however, all changed once they become part of a supervised industry affected by the recent revisions to the Anti-Money Laundering Directive.

Based on the available data, It comes as no surprise that most causes of intervention by the County Administrative Board in recent years have often occurred due to inadequate procedures for facilitating KYC, customer due diligence measures, and reporting. These breaches of the anti-money laundering regulations have resulted in the issuance of fines of up to several million SEK for individual cases. Data from Stockholm’s County Administrative Board confirms that the number of government agency interventions in money laundering cases has almost quadrupled between 2018 and 2021.


Risk model requirements

Building the ultimate risk model is an important part of the overall KYC process. Know your customer (KYC), simply put, is the process of identifying who you are doing business with. Therefore, a risk-based approach is a must for complying with regulations.

The risk process frequently starts with a general risk assessment of the business based on the products and services on offer and the risk level of being used for money laundering or terrorist financing. It is therefore important that regardless of your industry, a risk assessment should always be conducted.

The second stage is to conduct a risk assessment of the customers by creating a risk profile with a risk level for each client. This should be monitored and updated accordingly.

Finally, there must be routines and guidelines in place for monitoring and reporting suspected cases to the authorities.

At Trapets, we have integrated KYC screening into all our services to ensure that KYC data is used from screening to onboarding to transaction monitoring, allowing users to easily submit reports to the authorities.


How Trapets can help you avoid fines

Users of our AML platform for transaction monitoring can integrate KYC responses with transaction monitoring. This combination makes it more convenient than ever to receive actionable alerts when a customer’s transaction behaviour is unusual or may involve a risk of money laundering.

Each client has a dedicated customer success manager who offers expertise in setting up risk models within the platform. Minimising your risk of being used for money laundering or terrorist financing whilst fulfilling regulatory requirements.

For companies who would rather outsource their transaction monitoring to experts, Trapets provide a unique Managed Service via our FCS team. We have witnessed a growing demand for this by companies both in FinTech and finance. But also in other industries impacted by anti-money laundering and associated regulations.

Is your business prepared for the potential consequences of being audited? Have you implemented transaction monitoring yet? If so, how do you integrate transaction monitoring with your KYC process?

If you want to know more about how you can integrate your KYC processes with transaction monitoring. Automate your compliance processes, and reduce your workload, feel free to contact us!



Sources & additional reading