Insurance, investor protection most common regulatory violations

Business solutions provider Wolters Kluwer created a Regulatory Violations Intelligence Index, a compilation of penalties imposed by U.S. financial services regulators over the past several years.

The index will provide insights into the aggregate volumes and penalty amounts issued to U.S. financial services institutions. Wolters Kluwer plans to update the index semi-annually.

“In today’s rapidly evolving regulatory landscape, compliance executives increasingly depend on data-driven intelligence to help optimize their compliance risk management efforts,” says Vikram Savkar, executive vice president and general manager for Wolters Kluwer Compliance Solutions, in a statement. “Our Regulatory Violations Intelligence Index helps expand the peripheral vision of compliance leaders by analyzing the key supervisory priorities of the most important U.S. regulatory bodies.” 

The index tracks competition-related offenses (which involve activities that achieve unfair business or financial advantage through market manipulation or anti-competitive practices); consumer protection offenses (which involve violations of consumer protection rules that safeguard the civil or legal rights of consumers or the protection of their identity or personal information); and financial offenses (involving a broad set of violations that pertain to illegal financial practices.)

In its inaugural release, covering the period from 2018 to 2023 in half-year increments, the list is dominated by insurance violations, which were classified as consumer protection violations. Wolters Kluwer found a total of 937 enforcement actions in this period. The second most common violation, investor protection violations (classified as financial offenses), stood at 381.

However, when it comes to assessed penalties, the latter outdoes the former by far. Regulators handed out around $17 billion in penalties for investor protection violations in this time period versus about $497 million for insurance violations.

Just as telling were the violations that seemed to garner little attention or loss. In the 2018-2023 time period, Wolters Kluwer could find only two violations of the Americans with Disabilities Act (assessed penalties of $310,000), 11 discrimination-related penalties in a non-employment context (assessed penalties of $88 million), and exactly one payday-lending violation (assessed penalties of $10,000). Violations pertaining to bankruptcy professionals, money laundering, securities issuance and trading, export controls and kickbacks, and bribery each had only one enforcement action during this time.

The index found only eight tax-related violations, and only three accounting fraud or deficiencies-related violations, among U.S. financial services institutions.

Quantity, however, does not mean quality. Certain enforcement actions, while remarkably low in terms of specific violations, held some of the highest assessed penalties. For instance, while insurance violations were the most common overall, the total assessed penalties equaled about $497 million. While a princely sum to many, it paled in comparison to the $17 billion in penalties for investor protection violations, $16 billion for anti-money laundering deficiencies, $12 billion for toxic securities abuses, $8.4 billion for consumer protection violations, $5.7 billion for Foreign Corrupt Practices Act violations, $5.6 billion for economic sanction violations, $4.4 billion for fraud, $3.7 billion for banking violations and $1.1 billion for tax violations.