Nationwide Building Society has received a penalty of £44 million from the Financial Conduct Authority (FCA) over “inadequate” anti-financial crime systems and controls.

During the nearly five year period of October 2016 to July 2021, the building society had ineffective systems for keeping up-to-date due diligence and risk assessments for all of its personal current account customers and for monitoring their transactions, according to the regulator.

The organisation was also aware at the time that some of these customers were using their personal account for business activity, which is in breach of its terms.

The UK financial services watchdog said that in one case, Nationwide missed opportunities to identify a customer using personal current accounts to receive fraudulent Covid furlough payments.

The customer received 24 payments totalling £27.3 million over 13 months, with £26.01 million of this deposited over eight days.

HMRC recovered £26.5 million, but approximately £800,000 remains unrecovered.

Nationwide did not offer business current accounts during this period, so did not have the right processes in place to manage the financial crime risks from business activity.

This meant Nationwide was unable to effectively identify, assess, monitor or manage the money laundering risks among its personal current account customers. It also meant Nationwide did not have an accurate picture of its customers who presented a higher risk of financial crime.

Nationwide would have been fined just under £63 million but it agreed to resolve its failures, qualifying for a 30 per cent discount under the FCA's processes.

Nationwide commenced a large-scale financial crime transformation programme in July 2021.

"Nationwide failed to get a proper grip of the financial crime risks lurking within its customer base," said Therese Chambers, joint executive director of enforcement and market oversight at the FCA. "It took too long to address its flawed systems and weak controls, meaning red flags were missed with serious consequences.

"Building societies and banks have a key role in the fight against financial crime. Firms must remain vigilant in this fight."

In July, both Barclays and challenger bank Monzo were fined by the FCA over failures in their approach to financial crime.

Barclays received a fine of £42 million for inadequate financial crime risk management relating to two separate cases.

In the case of WealthTek, the bank failed to check it had gathered sufficient information to understand the its money laundering risk before opening a client money account for the business. This meant the bank missed that the company was not permitted by the regulator to hold client money.

The bank agreed to make a voluntary payment of £6.3 million to WealthTek’s clients who have a shortfall in the money they have been able to reclaim.

Barclays was fined £39.3 million for failing to adequately manage money laundering risks associated with providing banking services to Stunt & Co.

Monzo was fined £21 million after 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 between October 2018 and August 2020.

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