The UK financial watchdog has fined digital challenger bank Monzo £21 million for inadequate controls of financial crime, which allowed some accounts to be set up with implausible information, such as using well-known London landmarks as an address.
Systems and controls to prevent financial crime in the onboarding process were lacking between late 2018 and the summer of 2020, the Financial Conduct Authority said, while requirements to prevent high-risk customers from opening accounts were repeatedly breached between 2020 and 2022.
Amidst a period of rapid growth, where the digital bank went from 600,000 customers in 2018 to almost 6 million in 2022, the FCA said the company's financial crime controls "failed to keep pace".
"Monzo fell far short of what we, and society, expect," said Therese Chambers, FCA joint executive director of enforcement and market oversight, noting that banks are "a vital line of defence in the collective fight against financial crime" and should have systems in place "to prevent the flow of ill-gotten gains into the financial system".
She explained that Monzo onboarded customers on the basis of limited and sometimes obviously implausible information, such as customers using well-known London landmarks as an address, as well as PO Boxes or foreign addresses with UK postcodes.
Monzo subsequently accepted that it was unable to confirm that all customers were UK-based and, following an independent review of the firm's financial crime framework in 2020, became a member of the Cifas fraud prevention service, which provides screening tools to help identify customers posing a high financial crime risk.
Monzo has now established and completed a financial crime change programme to improve its financial crime controls in line with recommendations made in the independent review, the FCA said.