The digital bank Monzo has been fined £21m over weak financial crime controls, after it allowed customers to register for accounts with “implausible” home addresses including 10 Downing Street, Buckingham Palace and Monzo’s own headquarters.
The Financial Conduct Authority’s (FCA) penalty follows a lengthy investigation, which discovered that Monzo’s internal controls failed to keep up with a rise in customers, which ballooned from 600,000 in 2018 to more than 5.8 million in 2022.
The regulator said Monzo failed to create and enforce proper controls for signing up customers and monitoring their transactions over the first two years. It also “repeatedly breached” rules preventing it from opening accounts for high-risk customers between 2020 and 2022.
The controls were lax enough that customers were able to register for accounts using “obviously implausible UK addresses when applying for an account”, FCA documents outlining the extent of the breaches said. That included well-known London landmarks including Buckingham Palace, 10 Downing Street, and Monzo’s business address.
The FCA’s joint enforcement director Therese Chambers said: “Monzo onboarded customers on the basis of limited, and in some cases, obviously implausible information …
“This illustrates how lacking Monzo’s financial crime controls were. This was compounded by its inability to properly comply with the requirement not to onboard high-risk customers.”
It also found instances where customers of Monzo – which was founded in 2015 and is known for its bright coral-coloured debit cards – were able to register with PO boxes or foreign addresses with UK postcodes.
Other customers were able to use one address to apply for an account but then reordered their card to a non-UK location.
In other cases, multiple customers were able to use the same address, raising the risk of possible money muling: where a person allows their bank account to become a conduit for the proceeds of organised crime.
Monzo’s “decision” to neither verify nor monitor customer addresses “heightened the risk of Monzo having onboarded, and continued a business relationship with, non-UK resident customers outside of its risk appetite”, the FCA said.
The penalty ends four years of speculation over the basis of the FCA investigation, which was first disclosed in Monzo’s 2021 annual report.
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Monzo’s chief executive, TS Anil, said in a statement that the FCA’s fine drew a line under issues that he said “have been resolved and are firmly in the past – with our learnings at the time leading to substantial improvements in our controls.
“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,” Anil added.
The FCA said the fine of £21.1m had been discounted from £30.1m after Monzo agreed to resolve the problems.
The fine comes months after Monzo’s rival digital bank Starling was fined £29m over “shockingly lax” financial crime controls that the FCA said “left the financial system wide open to criminals and those subject to sanctions” after its own massive growth. Starling apologised for its failings.
