The UK Financial Conduct Authority (FCA) has imposed a fine of over £21m on British online bank Monzo Bank due to inadequate systems and controls related to anti-financial crime measures.
The period under review by the FCA spans from October 2018 to August 2020. During this period, Monzo’s frameworks for customer onboarding, risk assessment, and transaction monitoring were found deficient in addressing financial crime risks, said the FCA.
This fine follows an independent review mandated by the FCA in August 2020 that scrutinised Monzo’s financial crime framework.
Following the review, the FCA set a requirement for Monzo to halt opening accounts for high-risk customers. However, between August 2020 and June 2022, Monzo breached this mandate by adding over 34,000 high-risk accounts, said the regulator.
FCA enforcement and market oversight joint executive director Therese Chambers said: “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.
“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.”
According to the FCA, Monzo has rapidly grown its customer base from approximately 600,000 in 2018 to over 5.8 million in 2022.
According to the FCA, despite Monzo’s expansion and diversification of services over the years, including its transition from prepaid payment cards to business banking services and loans, its compliance mechanisms did not keep pace. The regulatory body noted that this lag in compliance posed risks in financial crime controls.
The FCA identified shortcomings in Monzo’s customer due diligence processes, which compromised its ability to verify customer identities and assess financial crime risks effectively.
Monzo acknowledged its lapses in address verification and other foundational aspects of their customer onboarding process which led to situations where customers provided implausible addresses or maintained multiple accounts without detection.
Acknowledging these deficiencies, Monzo has since established a programme to enhance its financial crime controls.
Originally facing a potential fine of over £30m, Monzo benefited from a 30% reduction by agreeing to settle the matter promptly under FCA’s procedures.
