Monzo faced a GBP 21 million fine from the Financial Conduct Authority (FCA) following an investigation into its approach to financial crime prevention.
The FCA identified shortcomings in Monzo’s systems for onboarding, customer risk assessment, and transaction monitoring between 2020 and 2022. During this period, tens of thousands of customers were onboarded without sufficient checks being conducted.
Regulatory Failures
According to the FCA, Monzo continued to open accounts for over 34,000 high-risk individuals between August 2020 and June 2022 despite facing regulatory restrictions. The bank was repeatedly found to have failed to comply with imposed requirements meant to mitigate financial crime risks.
One of the key issues identified by regulators was Monzo’s decision in 2019 to disable an address verification feature, which could have prevented problematic customer information from passing through. This move allowed for obviously false addresses, including landmarks such as Buckingham Palace and 10 Downing Street, to be used.
While acknowledging the historical nature of these findings, Monzo stated that internal reforms had resolved these issues. The bank received a GBP 21 million fine instead of the possible GBP 30 million penalty due to early resolution, qualifying for a 30% reduction in the fine.
The FCA noted that since registering with CIFAS, Monzo’s fraud prevention database in 2020, about 53,600 customers who failed screening were identified. The bank committed to closing more than half of these accounts.
Remediation Efforts
Monzo has since implemented a financial crime remediation program, incorporating recommendations from an independent review and aimed at enhancing its compliance framework.
The fine highlights the increasing regulatory scrutiny on digital banks’ financial crime controls. Last year, Starling Bank faced a similar GBP 29 million penalty for deficiencies in its customer vetting processes.
Regarding these findings, Monzo’s Group CEO, TS Anil, commented: The FCA’s findings relate to historical issues that have since been addressed through significant investments and improvements in our controls. We are pleased that the FCA recognizes our ongoing commitment to managing financial crime risks as we grow towards 13 million customers. At Monzo, we have the right team, best-in-class technology, and an unwavering commitment to stopping financial crime.”
