Challenger bank, Monzo, have been handed down a £21 million fine after flouting rules banning high-risk customers from opening accounts.
The Monzo failed to properly challenge and verify “obviously” false information fed into onboarding systems, including home addresses stated as being Buckingham Palace and 10 Downing Street. As a result, these customers were onboarded because Monzo had turned off an address verification system back in 2019.
The bank switched off the system to reduce “false negatives” which open up financial crime risks.
However, regulators have increasingly stepped up scrutiny of which financial crime controls banks are deploying or abandoning. The FCA also reprimanded Starling Bank last year issuing a £29 million fine for its ‘shockingly lax’ screening of higher risk customers.
Charles Rogers, Senior Financial Services Solicitor at Harper James, commented on what these big hefty fines mean for other firms, as Monzo’s case shows the “real-world cost of deprioritising AML and KYC compliance” as regulators will step in.
Disabling address verification resulted in “over 34,000 high-risk accounts being opened using implausible addresses like 10 Downing Street and Buckingham Palace.”
Starling Bank opened 54,000 accounts for nearly 49,000 high risk customers between September 2021 and November 2023, even while under FCA restrictions.
He continued, “the FCA expects firms to embed proportionate, risk-based systems from day one and to continually adapt them as the business scales. This includes not only onboarding checks, but real-time monitoring, internal escalation procedures, and governance frameworks that senior managers can stand behind.”
