The UK’s Financial Conduct Authority (FCA) has fined neobank Monzo £21,091,300 due to “inadequate” systems and controls to combat financial crime that were in place from October 2018 to August 2020.
Monzo’s customer base has rapidly expanded, growing from around 600,000 in 2018 to over 5.8 million in 2022. However, the FCA noted that Monzo’s financial crime controls did not keep pace with this growth. The bank failed to effectively design, implement, and maintain adequate systems for customer onboarding, risk assessment, and transaction monitoring, thereby increasing the risk of financial crime. This led the FCA to mandate a comprehensive independent review of the firm’s financial crime framework in August 2020.
In addition to the independent review, the FCA imposed a requirement preventing Monzo from opening new accounts for high-risk customers. Nevertheless, from August 2020 to June 2022, Monzo repeatedly breached this requirement by onboarding over 34,000 high-risk customers, including some with implausible addresses like 10 Downing Street and Buckingham Palace.
Therese Chambers, FCA joint executive director of enforcement and market oversight, stated, “Banks are a vital line of defense 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. The onboarding of customers based on limited and often implausible information illustrates significant gaps in Monzo’s financial crime controls. This shortfall was exacerbated by their failure to comply with the terms preventing them from onboarding high-risk customers.”
In response, Monzo has established and completed a financial crime change program aimed at improving its control framework in line with the independent review’s recommendations.
In a related case, fellow neobank Starling was fined £29 million in October for what the regulator termed “shockingly lax” anti-money laundering screening.