Financial institution, Monzo, penalized at £21M, due to inappropriate customer onboarding practices, involving clients residing at Buckingham Palace and 10 Downing Street addresses.
In a significant move, the UK Financial Conduct Authority (FCA) has imposed a fine of over £21 million on Monzo Bank due to serious shortcomings in its financial crime controls from October 2018 to August 2020[1][3][4].
The FCA's investigation revealed several key areas of failure:
1. **Deficient customer onboarding controls:** Monzo was found to have onboarded customers using implausible addresses, such as famous London landmarks or foreign addresses with UK postcodes, indicating weak identity verification[1][2][3].
2. **Weak risk assessment and transaction monitoring:** The FCA found that Monzo's systems were unable to adequately address financial crime risks as its customer base grew rapidly, from around 600,000 in 2018 to over 5.8 million in 2022[1][3].
3. **Breach of FCA mandate on high-risk customers:** After an FCA-mandated independent review in August 2020, Monzo agreed to stop onboarding high-risk customers. However, between August 2020 and June 2022, it onboarded over 34,000 high-risk accounts, contravening the requirement[1][3][4].
Therese Chambers, the FCA's joint executive director of enforcement and market oversight, stressed the importance of banks as a *"vital line of defence"* against financial crime and criticised Monzo for falling short of expectations by onboarding customers on limited or implausible data, thereby risking the financial system's integrity[1][2][3][4].
Monzo's CEO, TS Anil, acknowledged that the findings relate to a historical period that ended three years ago and highlighted significant improvements since, including substantial investments in recruiting financial crime experts and enhancing controls[2].
This fine marks the third substantial penalty for challenger banks in the last year by the FCA for similar failings, following fines against Starling and Metro banks[4]. It underscores the regulator's vigilance on anti-financial crime measures in the rapidly growing digital banking sector.
Monzo, with its current customer base approaching 13 million, claims to have the right team, best-in-class technology, and is committed to addressing financial crime[1]. According to TS Anil, the issues mentioned have been resolved and are in the past, with learnings leading to substantial improvements in Monzo's controls[2].
The FCA's statement reiterates that banks are a vital line of defence in the collective fight against financial crime. Monzo has set up and completed a financial crime change program to remediate and enhance its wider financial crime control framework[1].
[1] Financial Conduct Authority (FCA) Press Release, 2022 [2] Monzo Press Release, 2022 [3] The Guardian, 2022 [4] BBC News, 2022
Businesses within the financial sector, such as Monzo Bank, are expected to employ robust financial crime controls to maintain the integrity of the financial system. The UK Financial Conduct Authority (FCA) discovered deficiencies in Monzo's financial crime controls, particularly in their customer onboarding and risk assessment processes, leading to a £21 million fine.
