FCA Fines Monzo £21m for Failings in Financial Crime Controls

The Monzo FCA fine of £21 million highlights serious  problems with the digital bank’s controls for stopping financial crime. The regulator said that there were problems with better monitoring, and managing financial risk.

Monzo also repeatedly breached a requirement preventing it from opening accounts for high-risk customers between August 2020 and June 2022.

Monzo’s customer base has grown rapidly, increasing almost tenfold from around 600,000 in 2018 to over 5.8 million in 2022. However, Monzo’s financial crime controls failed to keep pace with its customer and product growth.

This Monzo FCA fine is one of the most important compliance actions in UK fintech, and it shows that the regulator is serious about enforcing anti-money laundering rules.

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 failings resulted in the FCA requiring a comprehensive, independent review of the firm’s financial crime framework in August 2020.

Alongside the independent review, the FCA imposed a requirement preventing Monzo from opening new accounts for high-risk customers. However, between August 2020 and June 2022, it repeatedly failed to comply with the terms of the requirement, including signing up over 34,000 high-risk customers.

Therese Chambers, FCA joint executive director of enforcement and market oversight, said:‘Banks are a vital line of defence in the collective fight against financial crime. 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.

‘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 has established and completed a financial crime change programme to remediate and enhance its wider financial crime control framework in line with recommendations made in the independent review.

The FCA continues to supervise firms to improve standards and ensure that they have the right systems and controls to manage financial crime risks. This is the 10th fine the FCA has imposed on a bank for financial crime control failings in the last 4 years.

The FCA highlighted financial crime as one of its priorities for retail banks in its 2024 supervisory strategy.

The FCA’s action shows how important it is for all regulated businesses to have strong controls against financial crime. It also makes people pay more attention to how Monzo and other neobanks will deal with compliance in the future.

Group CEO of Monzo, TS Anil: “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, 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.”