The FCA has imposed a £21 million fine on Monzo Bank. This massive penalty is a result of egregious deficiencies in the bank’s anti-financial crime safeguards. The FCA’s investigation led to the discovery of a major loophole in Monzo’s account sign-up system. Some customers registered with fake addresses, such as Buckingham Palace and 10 Downing Street. This lack of oversight is extremely concerning given the bank’s record of failing to prevent financial crime.
Surprisingly, the FCA found Monzo’s controls to be shockingly weak. The reality was that customers were easily able to sign up using fictitious UK addresses, PO boxes, and even overseas addresses with UK postcodes. In a concerning trend, some customers applied for accounts using one address but later reordered their cards to non-UK locations. This practice obviated the integrity of the bank’s customer verification processes.
Therese Chambers from the FCA stated, “Monzo onboarded customers on the basis of limited, and in some cases, obviously implausible information.” The regulator emphasized Monzo’s lack of an adequate and robust system of controls for onboarding consumers. This lack of oversight resulted in numerous rule violations meant to prevent high-risk people from opening accounts from 2020 to 2022. The FCA stated that Monzo did not have the appropriate systems in place to supervise customer transactions. That scorn continued through PRIA’s first two years of operation.
The probe into Monzo was originally revealed in the bank’s 2021 annual accounts. Only a few months prior, competitor digital bank Starling faced a massive £29 million penalty. This latest penalty exemplifies the continuing problems with lax financial crime controls across the industry. Both occurrences highlight an increasing critical eye toward the practices of digital banking in the UK.
Monzo’s chief executive, TS Anil, admitted that the fine was heavy. He showcased the steps they’ve taken to make things right. He stated, “have been resolved and are firmly in the past – with our learnings at the time leading to substantial improvements in our controls.” Anil expressed confidence in the bank’s commitment to managing risks effectively, saying, “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.”
Monzo’s recent troubles may point to a larger trend across the entire financial industry in their attempts to protect against financial crime. Anil remarked on this concern, stating, “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.”