Digital bank Monzo has been fined £21m by the Financial Conduct Authority (FCA) for inadequate anti-financial crime prevention systems between 2018 and 2020.
According to the regulator, Monzo failed to scale its financial crime controls alongside the rapid growth in its customer base during this time period, when Monzo grew from around 600,000 users to almost six million.
The FCA said the challenger bank “failed to design, implement and maintain adequate customer onboarding, customer risk assessment and transaction monitoring systems to mitigate the risk of financial crime”.
These systemic failings prompted the FCA to require a comprehensive review of Monzo’s financial crime framework in 2020, which included a requirement preventing Monzo from opening new accounts for “high-risk” customers.
The FCA also said that between August 2020 and June 2022, the bank did not comply with this order, onboarding more than 34,000 high-risk customers.
“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. Monzo fell far short of what we, and society, expect,” said Therese Chambers, FCA joint executive director of enforcement and market oversight.
“Monzo onboarded customers on the basis of limited, and in some cases, obviously implausible information – such as customers using well known London landmarks as an address. This illustrates how lacking Monzo’s financial crime controls were. This was compounded by its inability to properly comply with the requirement not to onboard high-risk customers.”
Monzo chief executive TS Anil told UKTN: “The FCA’s findings relate to a historical period that ended three years ago and draw a line under issues that have been resolved and are firmly in the past – with our learnings at the time leading to substantial improvements in our controls.
“I’m pleased the FCA recognises the significant investments we have made, as well as our ongoing commitment to managing these risks today…financial crime is an issue that affects the entire industry – and at Monzo, we have the right team, best-in-class technology and an unwavering commitment to doing all we can to stop it in its tracks.”
The fine comes less than a year after Monzo was reprimanded by the Competition and Markets Authority (CMA) for what it described as “especially concerning” breaches of competition regulation.
Fellow challenger bank Starling was similarly handed a fine, worth £29m, from the FCA for inadequate financial crime prevention systems.
Correction: This content was corrected post-publish to clarify the timeframe that Monzo has been fined over is between 2018 and 2020.