Monzo has been fined GBP 21 million by the Financial Conduct Authority (FCA) following multiple failings in its approach to financial crime prevention.
The penalty relates to shortcomings identified between 2020 and 2022, during which the bank onboarded tens of thousands of customers without conducting sufficient checks.
The regulator concluded that Monzo’s systems for onboarding, customer risk assessment, and transaction monitoring had not kept pace with its rapid expansion. The FCA noted that these systems were not robust enough to address actual or potential risks associated with financial crime.
Failure to comply with regulatory orders
According to the FCA, Monzo continued to open accounts for over 34,000 high-risk individuals between August 2020 and June 2022, despite being under regulatory restrictions. Officials from the regulator stated that the bank had repeatedly failed to comply with imposed requirements designed to limit exposure to financial crime risks.
The investigation began in 2020 with a formal probe launched a year later. One of the triggers for regulatory concern was Monzo’s 2019 decision to disable an address verification feature that would have flagged problematic customer information. The bank reportedly did this to avoid causing issues for existing account holders, but the move allowed obviously false addresses to pass through, including high-profile landmarks such as Buckingham Palace, 10 Downing Street, and Monzo’s own headquarters.
Officials from Monzo were cited as acknowledging the historical nature of the findings, adding that the issues in question had been addressed through internal reforms. The bank avoided a steeper GBP 30 million fine by agreeing to resolve the matter early, qualifying for a 30% reduction.
Following its registration with CIFAS, the UK’s fraud prevention database, in 2020, Monzo identified around 53,600 customers who failed the database screening. The bank committed to closing more than half of those accounts.
The FCA remarked that Monzo has since implemented a financial crime remediation programme, incorporating recommendations from an independent review and aimed at improving its compliance framework.
The fine comes in the context of growing regulatory scrutiny of digital banks’ financial crime controls. Last year, Starling Bank received a GBP 29 million penalty for similar deficiencies in customer vetting processes.
Regarding these developments, Group CEO of Monzo, TS Anil, stated the following:
“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.”
