Monzo Bank hit with £21m fine for ‘inadequate’ financial crime controls

Monzo Bank has been fined £21million for ‘inadequate anti-financial crime systems’ spanning a period between October 2018 and August 2020. 

The Financial Conduct Authority found Monzo repeatedly breached a requirement to refuse accounts to high-risk customers between August 2020 and June 2022.

Monzo has grown rapidly since it launched in 2015, increasing its customer base almost tenfold from around 600,000 in 2018 to 5.8million in 2022.

However Monzo’s financial crime controls failed to keep pace with its customer and product growth the FCA said.

The digital bank with 12million customers failed to design, implement and maintain sufficient customer onboarding, customer risk assessment and transaction monitoring systems to lessen the risk of financial crime. 

These failings resulted in the FCA calling for a comprehensive, independent review of Monzo’s financial crime systems in August 2020.

Alongside the independent review, the FCA imposed a requirement preventing Monzo from opening new accounts for high-risk customers. 

But between August 2020 and June 2022, Monzo ‘repeatedly failed to comply with the terms of the requirement’, signing up over 34,000 high-risk customers during this time, according to the FCA. 

The digital bank would have suffered a steeper fine of £30million, but qualified for a 30 per cent discount because it agreed to resolve these matters.

The FCA confirmed Monzo has established and completed a financial crime change programme to improve its financial crime control systems in line with recommendations made in an independent review. 

Therese Chambers, FCA joint executive director of enforcement and market oversight, said: ‘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.’

Monzo chief executive TS Anil 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.’

Last year, rival Starling Bank was hit with a steeper £29million fine, reduced from £41million, for ‘shockingly lax’ financial crime controls, which ‘left the financial system wide open to criminals’ over a four-year period.