Monzo, a popular digital bank, has been fined GBP 21 million by the Financial Conduct Authority (FCA) due to several shortcomings in its approach to preventing financial crimes.
The FCA’s findings cover issues identified between 2020 and 2022. During this period, Monzo onboarded a significant number of customers without conducting thorough checks on them.
According to the regulator, Monzo’s systems for customer onboarding, risk assessment, and transaction monitoring did not keep up with its rapid growth, making it less capable of addressing potential financial crime risks.
The FCA highlighted that Monzo failed to comply with regulatory orders by opening accounts for more than 34,000 high-risk individuals between August 2020 and June 2022, despite facing restrictions.
The investigation started in 2020, and one of the key triggers was Monzo’s decision to disable an address verification feature that would have detected suspicious customer information. This move allowed obviously false addresses, such as those associated with famous landmarks like Buckingham Palace and Monzo’s own headquarters, to pass through unchecked.
While acknowledging these historical issues, officials from Monzo stated that the problems had been addressed internally. The bank managed to secure a GBP 30 million reduction in its fine by resolving the matter early.
After joining CIFAS, the UK’s fraud prevention database, in 2020, Monzo identified about 53,600 customers who failed the screening process and committed to closing over half of those accounts. The FCA noted that these actions have since improved Monzo’s compliance framework.
The fine reflects growing regulatory attention on digital banks’ financial crime controls. Last year, Starling Bank also received a GBP 29 million penalty for similar deficiencies in customer vetting processes.
Monzo’s Group CEO, TS Anil, responded to the findings by stating: “The FCA’s findings refer to a historical period that has ended and draws a line under issues resolved. We’ve made significant investments to improve our controls, and we remain committed to managing these risks as our customer base grows to 13 million.
Financial crime is an issue for the entire industry, but at Monzo, we have the right team, best-in-class technology, and a strong commitment to preventing it.”