The Financial Conduct Authority (FCA) has fined Nationwide Building Society GBP 44 million, stating inadequate financial crime controls between October 2016 and July 2021.
According to the FCA, during the aforementioned period, Nationwide had inefficient systems for maintaining up-to-date due diligence and risk assessment for all its personal current account customers, as well as for monitoring their transactions.
Additionally, the financial institution had known that some of those customers were leveraging their personal accounts for business activity, which represented a breach of its terms. At that point in time, Nationwide’s offering did not include business current accounts; therefore, it did not have the right processes to manage the financial crime risks from business activity.
This led to Nationwide being unable to identify, assess, and monitor or manage the money laundering risks among its personal current account customers. Also, it meant that the financial institution did not have a precise idea of its customers who had an increased risk of financial crime.
The FCA gave a serious case as an example, when Nationwide missed opportunities to identify a customer leveraging personal accounts to receive fraudulent COVID-19 furlough payments. The individual got 24 payments totally GBP 27.3 million over 13 months, with GBP 26.01 million of this deposited over eight days. His Majesty’s Revenue & Customs (HMRC) recovered GBP 26.5 million. However, nearly GBP 800,000 remains uncovered.
The FCA’s response
Speaking on these findings, Therese Chambers, joint executive director of enforcement and market oversight at the FCA, stated that Nationwide failed to understand the financial crime risks waiting around within its customer base. Additionally, due to the extended time it took to address its flawed systems and weak controls, the financial institution missed issues that led to significant consequences.
Furthermore, Nationwide was aware of the flaws in its systems and controls, with the financial institutions taking the appropriate measures to improve them. Despite this, as mentioned by the FCA, it failed to adequately address those issues promptly. Nationwide also launched a large-scale financial crime transformation programme back in July 2021.
