The Financial Conduct Authority (FCA) has fined Monzo £21 million for failures in its anti-financial crime systems and controls.

According to the regulator, between October 2018 and August 2020 the digital bank failed to design and implement adequate customer onboarding, customer risk assessment and transaction monitoring systems to mitigate the risk of financial crime.

This led to the FCA conducting an independent review of the firm's financial crime framework in August 2020. It also imposed a requirement preventing the challenger from opening new accounts for high-risk customers.

However, the UK financial watchdog revealed that the company repeatedly breached this requirement between August 2020 and June 2022, signing up over 34,000 high-risk customers.

While Monzo's customer base grew rapidly over this period, increasing almost tenfold from around 600,000 in 2018 to over 5.8 million in 2022, the FCA says that its financial crime controls failed to keep pace with its customer and product growth.

Therese Chambers, FCA joint executive director of enforcement and market oversight, said: "Banks are a vital line of defence 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."

She added that Monzo had onboarded customers on the basis of limited, and in some cases, "obviously implausible information", such as customers using well known London landmarks as an address.

"This illustrates how lacking Monzo's financial crime controls were," continued Chambers. "This was compounded by its inability to properly comply with the requirement not to onboard high-risk customers."

Monzo has since established and completed a financial crime change programme to improve its wider financial crime control framework in line with recommendations made in the independent review.

The fine is the 10th the FCA has imposed on a bank for financial crime control failings in the past four years.

“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," said TS Anil, group chief executive, TS Anil. "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.”

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