FCA Fines Nationwide £44m Over Financial Crime Failures
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The Financial Conduct Authority (FCA), the UK’s financial watchdog, announced earlier today, December 12, that it has fined Nationwide £44 million for failings in financial crime controls.
According to the regulator, Nationwide has been relying on inadequate anti-financial crime systems and controls during a lengthy period between October 2016 and July 2021. During said period, Nationwide used ineffective systems for keeping up-to-date due diligence and risk assessment for all of its personal current account customers and monitoring their transactions.
The FCA highlighted that Nationwide was aware that some of the customers were using their personal accounts for business activity, which represents a breach of its terms. Furthermore, the company did not offer business current accounts at this point, so it lacked the right processes that were supposed to be in place to manage the financial crime risks from business activity.
As a result, Nationwide was not able to identify, assess, monitor, or manage the money laundering risks among its personal current account customers. The regulator also said that this means Nationwide also did not have an accurate insight into its customers, which is particularly troubling when it comes to those who presented a high risk for financial crime.
Nationwide Failed To Address A Case Of Financial Crime Involving Over £27m
The FCA pointed out one serious case where Nationwide failed to identify a customer who used a personal current account to receive fraudulent Covid furlough payments.
The user in question received as many as 24 payments over 13 months, totaling £27.3 million. Not only that, but £26.01 million was deposited in just 8 days, which failed to trigger alarms at Nationwide and cause the firm to react.
Since the regulators became aware of the problem, His Majesty’s Revenue & Customs (HMRC) managed to recover the majority of the funds – around £26.5 million. However, the remaining £800,000 still remains unrecovered as of yet.
The regulator’s joint executive director of enforcement and market oversight, Therese Chambers, commented on the situation, noting that Nationwide failed to get a proper grip of the financial crime risks among its customer base.
“It took too long to address its flawed systems and weak controls, meaning red flags were missed with serious consequences,” she explained, adding that building societies and banks have a key role in the fight against financial crime, so companies need to remain vigilant in the fight.
The FCA claims that Nationwide was aware of its system’s weaknesses, and it undertook work to make improvements. However, it failed to do so in a timely manner.
