A regulator fined U.K. neobank Monzo £21.1 million ($28.7 million) Monday for failures of its anti-money laundering controls after onboarding customers who used Buckingham Palace and Monzo’s corporate headquarters as their addresses.
The Financial Conduct Authority said that Monzo’s controls “failed to keep pace” with rapid growth, which saw the neobank’s customer base jump tenfold from 600,000 in 2018 to nearly 6 million in 2022.
The fine, though, is related to shortcomings from October 2018 to August 2020, during which time Monzo’s AML efforts were “inadequate to counter actual and potential financial crime risks effectively,” the British regulator said. Not only did Monzo accept customers who used “obviously implausible U.K. addresses” like Buckingham Palace, the FCA said, it also accepted customers using P.O. Box addresses and foreign addresses with U.K. postcodes.
“In particular, Monzo failed to design, implement and maintain adequate customer onboarding, customer risk assessment and transaction monitoring systems to mitigate the risk of financial crime,” the FCA wrote in a press release. “These systemic failings resulted in the FCA requiring a comprehensive, independent review of the firm's financial crime framework in August 2020.”
Alongside the review, the FCA barred Monzo from opening new accounts for high-risk customers. “However, between August 2020 and June 2022, it repeatedly failed to comply with the terms of the requirement, including signing up over 34,000 high-risk customers,” the FCA wrote.
All in, the bank’s controls “fell far short of what we, and society, expect,” said Therese Chambers, FCA joint executive director of enforcement and market oversight.
“Banks are a vital line of defence in the collective fight against financial crime. They must have the systems in place to prevent the flow of ill-gotten gains into the financial system,” she said in a prepared statement.
In response to the FCA’s independent review, Monzo said it has remediated and bolstered its financial crime control framework.
“The FCA’s findings relate to a historical period that ended three years ago and draw a line under issues that have been resolved and are firmly in the past — with our learnings at the time leading to substantial improvements in our controls,” Monzo Group CEO TS Anil said in a prepared statement.
“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,” he said. “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.”
This is the 10th AML-related fine imposed by the FCA in the last four years, including a £107.7 million ($146.3 million) fine of Santander UK in 2022 and a £63.9 million ($86.8 million) fine of HSBC in 2021. It also fined fellow U.K. neobank Starling £28.96 million ($39.3 million) in 2024 for flaws in its financial crime prevention systems and controls.
