Digital bank penalised for inadequate financial crime controls and regulatory breaches
The Financial Conduct Authority (FCA) has issued a £21.1 million fine to Monzo Bank for serious weaknesses in its anti-financial crime systems and repeated breaches of regulatory requirements over a four-year period.
The regulator found that between October 2018 and August 2020, Monzo did not have adequate systems in place to manage risks tied to financial crime. Despite rapid growth — from around 600,000 customers in 2018 to more than 5.8 million in 2022 — the digital bank failed to scale its compliance infrastructure to match.
According to the FCA, Monzo lacked effective processes for customer onboarding, risk assessments, and transaction monitoring, all key areas for identifying potential criminal activity. In August 2020, the FCA ordered an independent review of Monzo’s financial crime controls.
As part of that intervention, Monzo was restricted from opening accounts for high-risk customers. However, the bank failed to comply with this requirement, allowing over 34,000 high-risk accounts to be opened between August 2020 and June 2022.
UK watchdog fines Monzo £21mn for ‘falling far short’ on financial crime https://t.co/8uZGPURxPb
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The fine on Monzo marks the 10th penalty levied by the FCA against a bank for similar failings in the past four years. The regulator has named financial crime risk as a key focus area in its 2024 supervisory strategy for retail banks.
“Banks are a vital line of defence in the collective fight against financial crime,” said Therese Chambers, the FCA’s joint executive director of enforcement and market oversight. “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.”
Chambers added that 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.”
Since the review, Monzo has completed a financial crime improvement programme aimed at strengthening its compliance framework, the FCA noted.
“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,” said TS Anil, group chief executive of Monzo.
“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.”
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