The data sheds a light on the costs of falling foul of various compliance requirements around the world, explaining why "regtech" and procedures such as know-your-client checks are so important.

The number of firms being hit with high fines from regulators for compliance failings was markedly higher than for small-fine punishments in 2022, new global figures show.

New data from the Moody's Analytics "Grid" (see definition below) showed that, during last year, the number of businesses receiving large fines was more than twice as high as those receiving small ones.

The organization crunched data from from January 1, 2018, to April 21, 2023. Large fines are classified as more than $10,000 and small fines as less than this amount.

During this five-year period, 60 per cent of organizations received fines classed as large, while 40 per cent received fines classed as small. Since 2018, the number of companies receiving large fines grew consistently, while the rate of small fines has been on the decline for the past two years (since 2021).

The rate of large fines levied in 2023 is already at an increased level. According to Moody’s Grid data, the total number of organizations receiving large fines in 2023 has already exceeded the number that received large fines throughout the whole of 2022 – as of April 21.

“These increases can be seen across a number of jurisdictions, suggesting that regulators internationally are focused on moving the needle of compliance beyond a ‘check-the-box exercise’ to a business measure with collective community impact,” Katherine Conroy, assistant director, product strategist at Moody’s Analytics, said.

“Compliance screening and ongoing monitoring that synthesize sanctions, beneficial ownership, financial crimes as well as predicate crimes and associative risks ensure not only robust due diligence to protect businesses from larger fines, but also action the growing expectations of global businesses toward responsible, sustainable corporate strategies.”

Elsewhere, other data shows that compliance-related figures have risen. In August 2021, Fenergo, a provider of know your client (KYC) and client lifecycle management (CLM) solutions, said that the total value of penalties had fallen by 25 per cent – totaling $1.6 billion, compared with the same period of 2021. North America saw the single biggest regional increase in the value of financial penalties with over $1.5 billion, from $701.4 million in H1 2022. Regulators are settiing their sights on other problems besides KYC/AML violations, for example, on “greenwashing” investment propositions. Fenergo also found that executives in banks often spend compliance budgets inefficiently. 

In November 2022, data from financial information and data business Refinitiv showed that sanctions issued on countries and individuals have skyrocketed by 270 per cent since 2017, boosted by reactions to Russia’s invasion of Ukraine and the West’s pressure on Iran over the latter’s alleged nuclear weapons program.

(The term “grid” applies to a risk database of adverse media, sanctions, watchlists, and politically exposed persons, or “PEPs.”)