Monzo Bank was fined £21 million for loose anti-financial crime controls and allowed thousands of high-risk customers to open accounts, according to financial conduct authorities.
The city watchdog said it fined its £21,091,300 fine between October 2018 and August 2020 for “anti-financial crime system and under-control” digital banks.
The business also “repeatedly” violated a requirement to prevent it from opening an account for high-risk customers between August 2020 and June 2022.
Monzo was founded in 2015 and its customer base reached about ten times from 600,000 in 2018 to 5.8 million in 2022.
But the regulator said: “Monzo’s financial crime control measures have failed to keep up with the growth of its customers and products.
“In particular, Monzo failed to design, implement and maintain adequate customer onboarding, customer risk assessment and transaction monitoring systems to mitigate the risk of financial crime.
“These systemic failures have led to the need for a comprehensive, independent review of the company’s financial crime framework in August 2020.”
The supervisory authority also puts demands on app-based banks to prevent them from opening new accounts for high-risk customers.
But the FCA said: “between August 2020 and June 2022, it has repeatedly failed to comply with the terms required, including signing more than 34,000 high-risk customers.”
Therese Chambers, co-executive director of FCA law enforcement and market oversight, said: “Banks are an important national defense in the collective struggle against financial crime.
“They have to build systems to prevent ill-gotten gains from entering the financial system. Monzo is far from what we and society expect.
“Monzo, on a limited basis, is clearly incredible information on boarding a customer in some cases – for example, a customer using London’s famous landmarks as the address.
“This illustrates the lack of financial crime control in Monzo. This is complicated by the inability to properly comply with the requirements of not joining high-risk clients.”
Monzo has established and completed a financial crime change program to remedy and enhance its broader framework for financial crime control based on recommendations in the independent review.
The lender will be fined £300.1 million but agrees to resolve the issues and qualify for a 30% discount from the regulator.
The bank has since completed a plan to consistently upgrade its financial crime controls based on recommendations under independent review.
Monzo Group CEO TS Anil said: “The FCA’s discovery is related to historical periods that ended three years ago and has drawn a line under the problems of the past and has firmly solved the problem in the past – when our learning was significantly improved in our controls.
“I am glad that FCA recognizes the significant investments we have made and our ongoing commitment to managing these risks today as we grow more and more as businesses approach 13 million customers.”
