The Cost of Business with Bad Actors

Table of contents:

    Over the last 10 years since the onset of the global financial crisis, financial institutions across the world have been fined a monumental €27bn for lapses and non-compliance with anti-money laundering (AML), know your customer (KYC) and sanctions-related fines. This data was provided by Fenergo, a leading vendor offering digital regulatory and client lifecycle management software product development solutions for global financial institutions. CSHARK continuously contributes into software solutions for Fenergo. Despite a global crackdown that has rained upon banks and other financial institutions as a direct implication of 2008 crisis, their suite of solutions help banks to be compliant with local and global regulations, and significantly improve operational efficiencies that create optimized client experiences.

    And while regulations are expected to ease somewhat over the coming years, we are seeing instances where the cost of regulatory fines are shooting up in both mature regulatory markets (such as Europe, UK etc.) and across less mature regulatory emerging markets (e.g. APAC). Over the last year or so, we’ve seen existing regulations being enhanced (FinCEN Final Rule (CDD) in the US, Fifth EU Money Laundering Directive and MiFID II in Europe). We have also seen the introduction of new regulations such as MiFID II and data privacy laws like General Data Protection Regulation (GDPR) etc. Furthermore, we’re witnessing a more proactive enforcement of regulatory rules across Australia, Hong Kong and Singapore.

    CSHARK helps to provide increased protection for financial institutions striving to do business in an ever-connected but highly regulated world. It partners with the industry-leading provider of regulatory and digital technologies for financial institutions. With Fenergo’s suite of Regulatory and Digital Client Lifecycle Management technologies, the company helps financial institutions to remain compliant with local and global regulations, protecting their reputation, digitalize operations and generate significant efficiencies and cost-saving.

    Compliance by design | Fenergo's solutions

    How is that possible? Financial institutions achieve compliance ahead of regulatory deadlines; that means Fenergo’s solutions are reliable.

    The company offers the Regulatory Rules Engine, which is an intelligent solution that provides an out-of-the-box, easily configured repository of rules that financial institutions can utilize to future-proof their business against evolving regulatory and operational requirements. The company operates global regulatory compliance forums, which comprise of senior regulatory representatives of its global client base, culminating in a pool of 20,000+ compliance professionals. These forums have direct input into the Regulatory Roadmap, which helps financial institutions to manage regulatory change as business as usual. Furthermore, it ensures they achieve compliance ahead of the regulator deadline. When a Roadmap is ready, the company can translate it into codified rules for the software, ensuring regulatory currency for all clients, effectively giving them time to get ahead of upcoming implementation deadlines, without additional licencing or development costs. A global community of clients working together to ensure safety is unique in itself.

    Fenergo’s solutions offer:

    • Efficient client onboarding and client lifecycle management processes that improve time to onboard and time to revenue for financial institutions
    • Insight into all clients counterparties and all related associations, including beneficial owners
    • Global AML risk-based approach to regulatory coverage with many local and global AML typologies and regulations, such us AML/KYC rules (e.g. Fifth European AML Directive, FinCEN Final Rule (CDD), OTC Derivative rules (Dodd-Frank, MiFID II, EMIR), tax compliance (FATCA, CRS, 871m), data privacy rules (GDPR), etc.
    • Accurate identification and assessment of potential client risks, enabling financial institutions to refocus resources and effort to managing higher-risk client
    • Audit-friendly architecture, giving the option for simplified or enhanced customer due diligence for a complete transparency


    Why is that important

    It’s simple – dirty money cost money for financial institutions and their clients alike. The recent article on financial safety ‘The Cost of Dirty Money’ by Bloomberg explicitly shows us how much-limited oversight or faulty procedures cost.

    $1.9 billion dollars paid by another bank is also pretty hurtful. The bank had to pay the fine for failing the control of over $670 billion-worth wire transfers from Mexico and over $9.4 billion in purchases in U.S. These funds were used to create a system for laundering drug cartels’ money.

    Still not enough?

    $237 million dollars – this is the overall fine that another major institution had to pay because it didn’t tracked its subsidiary well enough. The subsidiary in question processed over $8.8 billion-worth transactions from 2007 to 2012. Almost no oversight was detected, which forced Federal Deposit Insurance Corporation and the California Department of Business Oversight to administer a huge punishment.

    That’s still not all. Consider this:

    • Since 2008, European-headquartered banks have been fined a total of $18 billion by US regulators, just for the AML and KYC fines alone.
    • Institutions headquartered in the APAC region have been fined a total of $1.3 billion by US regulators.
    • Europe accounts for 7% of global AML fines levied in the past 10 years, totalling over $1.7 billion across 83 separate fines

    These real-life examples give us a good idea of what happens if banks and other financial institutions don’t invest in systems covering client’s deposits and doesn’t allow for internal transparency.

    Follow the money!

    This old American proverb shows how much can be done by doing so little. An efficient client onboarding and managing through the whole lifecycle can and will save not only banks’ and clients’ money but also image. To achieve this, automation should be in place.

    To keep on top of an ever-evolving regulatory landscape where new regs are introduced every year and existing regulations undergo constant updating, financial institutions need to automate processes as much as they can, freeing up resources to focus on higher risk clients and tasks to human oversight. Financial institutions should aim to eliminate regulatory interpretation and introduce consistency into the regulatory compliance decision making process (Fenergo’s Rules Engine will do this).

    Future-proofing the organisation will also help, by collaborating with other financial institutions and ensuring that the company in question meets regulatory deadlines on time, every time (compliance by design). After all, the area of compliance is non-competitive.

    Fenergo’s products and CSHARK’s collaboration in creating them shows, that united front can and will make the difference for financial institutions. Just like a group effort of 20.000 compliance professionals.


    Bad Actors - in the world of financial regulations, this term is associated with individuals or companies that take advantage of certain privileges. Individuals or organisations do not allow these 'bad actors' to participate in certain regulated processes.

    If you want to find out more, read our outdated fintech system case study.

    If you want to drive the change in your company, contact us!

    Kamil Kwećka Co-Founder & Board Member CSHARK
    Kamil Kwećka
    CSHARK's co-founder and board member. Tech expert with over 10 years of software engineering expertise and technical background. He believes in a practical agile approach. Always with a positive attitude, he writes about business, FinTech, software, startups and leadership.