The UK’s top financial watchdog has fined one of the country’s fastest growing digital banks, Monzo, £21m ($28.48m) for allowing a number of “high-risk customers” to open accounts with them.
According to a press release from the FCA, Monzo had “inadequate anti-financial crime systems and controls between October 2018 and August 2020.” It was because of those shortfalls that the FCA started looking into the bank’s financial risk controls in 2020, and opened an investigation into the matter in 2021.
And despite being banned from signing up new customers, the FCA has said the bank “repeatedly breached a requirement preventing it from opening accounts for high-risk customers between August 2020 and June 2022.”
In total, the bank is said to have signed up more than 34,000 new customers during that period. The FCA says these new account openings all carried “high-risk”.
Monzo has also been accused of not having proportionate financial crime controls in place despite its customer base growing tenfold, from 600,000 in 2018 to almost six million in 2022.
“In particular, Monzo failed to design, implement and maintain adequate customer onboarding, customer risk assessment and transaction monitoring systems to mitigate the risk of financial crime,” the FCA said.
For now, the FCA has confirmed that “Monzo has established and completed a financial crime change programme to remediate and enhance its wider financial crime control framework in line with recommendations made in the independent review.”
Implausible information
Perhaps the most shocking revelation following the FCA’s investigation was that some of the bank’s customers used famous London landmarks as their addresses when applying to open an account with the bank. These included Buckingham Palace and 10 Downing Street.
“This illustrates how lacking Monzo’s financial crime controls were,” according to Therese Chambers, FCA joint executive director of enforcement and market oversight. “Banks are a vital line of defence in the collective fight against financial crime. They must have the systems in place to prevent the flow of ill-gotten gains into the financial system,” she added.
Rob Mason, director of regulatory intelligence at Global Relay, told GRIP the fine imposed by the FCA was a reflection of the seriousness of the violation, in this case the acquiring of a large number of new customers during a period when Monzo was restricted from doing so.
“The rapid rise in popularity of the challenger banks has not been matched by Monzo’s investment in compliance to maintain effective systems and controls around financial crime,” he said.
This is the 10th fine the FCA has imposed on a bank in the past four years for financial crime control failings, and the regulator says it continues to supervise firms to make sure they are meeting all requirements.
In its 2024 supervisory strategy for retail banks published in October last year, the FCA highlighted fighting financial crimes as one of its priorities for banks.