Monzo has been fined more than £21m by the Financial Conduct Authority (FCA) for a series of “systemic failings” in its financial crime controls.
This includes repeatedly breaching restrictions on opening accounts for high-risk customers.
The £21.1m penalty relates to serious weaknesses in the digital bank’s systems between October 2018 and August 2020.
During this time, the FCA found that Monzo’s processes for customer onboarding, risk assessment and transaction monitoring were not fit for purpose – despite its explosive growth in user numbers.
The regulator said Monzo ‘fell far short of what we, and society, expect’ during a critical period in which its customer base ballooned nearly tenfold from around 600,000 in 2018 to over 5.8m by 2022.
Despite being under enhanced scrutiny, Monzo also repeatedly breached a restriction imposed by the FCA in August 2020 which banned it from onboarding high-risk customers.
Between then and June 2022, the bank signed up more than 34,000 such users, flouting regulatory requirements in the process.
“Banks are a vital line of defence in the collective fight against financial crime,” said Therese Chambers, joint executive director of enforcement and market oversight at the FCA.
“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.
“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.”
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Monzo has since launched and completed a wide-ranging financial crime change programme, following recommendations made during an independent review ordered by the FCA in 2020.
The FCA said it will continue to supervise banks closely to ensure adequate safeguards are in place. This is the 10th fine handed to a UK bank for anti-financial crime failings in the past four years and signals the regulator’s ongoing focus in this area.
Financial crime controls are one of the FCA’s top priorities for retail banks under its 2024 supervisory strategy.
Monzo, which built its reputation as a challenger bank with a popular app and transparent fees, now finds itself navigating a more complex and heavily scrutinised regulatory environment.
On the fine, TS Anil, group CEO of Monzo, said: “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, as we go from strength to strength as a business approaching 13 million customers.
“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.”