The Financial Conduct Authority (FCA) imposed a GBP 44 million fine on Nationwide Building Society for inadequate financial crime controls spanning from October 2016 to July 2021.

Insufficient Systems and Monitoring

During this period, Nationwide lacked effective systems for maintaining up-to-date due diligence and risk assessments for its personal current account customers. The financial institution also failed to adequately monitor their transactions, according to the FCA.

Furthermore, it was known that some of these customers were using their personal accounts for business activities, which breached the terms of service. At the time, Nationwide’s offerings did not include business current accounts, meaning they lacked appropriate processes to manage financial crime risks related to such activities.

This oversight resulted in Nationwide’s inability to identify, assess, and monitor money laundering risks among its personal current account customers. Consequently, it was also unclear which customers posed a higher risk of financial crime.

A Case in Point

The FCA cited an example where Nationwide failed to detect a customer using personal accounts to receive fraudulent COVID-19 furlough payments. The individual received 24 payments totaling GBP 27.3 million over 13 months, with GBP 26.01 million deposited in eight days. HMRC recovered GBP 26.5 million but left nearly GBP 800,000 uncompensated.

FCA’s Statement

Commenting on the findings, Therese Chambers, Joint Executive Director of Enforcement and Market Oversight at the FCA, highlighted that Nationwide failed to recognize financial crime risks within its customer base. Additionally, the extended time taken to address these issues led to significant repercussions despite the institution’s efforts to improve systems.

Nationwide was aware of the system flaws but did not promptly rectify them. The financial institution subsequently initiated a large-scale financial crime transformation program in July 2021.