The Financial Conduct Authority announced fines of £21 million against UK Challenger Bank for serious AML weaknesses between 2018 and 2020. This follows a fine against Starling Bank for £28 million also a UK Challenger bank last year. The FCA found that, key elements of Monzo’s financial crime framework particularly with regard to customer risk assessments and the collection of customer information did not keep pace with the Firms expansion and during the VREQ period. FCA considers that they were inadequate understanding of FC related risks from Monzo’s customers. Prior to the VREQ period, (before 2020), Monzo operated a more limited approach to collecting customer information (CDD) at the point of onboarding. Whilst this facilitated account opening processes, it meant that Monzo did not obtain and or address sufficient information about prospective customers, in particular, the Firm failed to obtain the purpose and nature of the proposed customer relationship, and failed to review all adverse media alerts for a customer unless other risk factors were present.
In respect of business customers, Monzo’s CDD procedures did not provide, as required by the UK Money Laundering Regulations (MLRs), for verification of identity of all BO’ and persons of significant control.
Chronology – Key Dates
2016 – Monzo started business and received a report from an external consultant that stated that Monzo’s AML Policies & Procedures, were “adequate based on the size and complexity of the Bank”.
2017 -By February 2017 Monzo had 590,000 customers, with £71 million in deposits. Later that year FCA Supervision identified AML related weaknesses and required Monzo to address these, namely:
- Insufficient information on customers expected financial activity / customer profile, so this could be compared to actual activity
- The Customer risk assessment wasn’t good enough
- No Enhanced Due Diligence on customers except for PEPs and persons related to PEPs
- Customers transacting before completion of CDD checks at onboarding.
2018 – Monzo’s first MLRO departs and is replaced by a number of interim appointments until 2020
2020 – Monzo self declare that their AML framework is “not fully effective”, and that the Firm had onboarded too many customers with insufficient information.
2020 – FCA appoint a S.166 Skilled Person to review the AML Framework and make recommendations and implement a VREQ restricting onboarding of high risk customers,
2020 – In September and December 2020, the Skilled Person reported on weaknesses and made recommendations.
2022 – Monzo had grown with 5.4 million customers and deposits of £4.4 billion.
2023 – By March had grown to 7.4 million customers and deposits of £6 billion, and profits of
2024 – In August the skilled Person reported all but 1 Recommendation remained outstanding. By November, this final recommendation had been implemented and the VREQ was lifted.
2025 – FCA announces fine of £21 million. Monzo reports profits of £60.5 million (pre tax) for the year ending March 2025 from 12 million customers and deposits of £16.6 billion.
Final Comments:
How does a Bank in the UK start business with an external consultant reporting adequate controls and a year later the FCA identify inadequate controls? The external consultants summary, apparently accepted by the Banks directors and supervisors was actually that the AML controls were “adequate based on the size and complexity of the Bank”. This makes no sense as that’s not the test – the test is being regulatory compliant as a minimum and then risk based controls once the risk is understood. Monzo didn’t have customers but it soon would have millions so what was adequate in 2016 is irrelevant. Also Monzo didn’t collect enough information to properly risk assess its customers. Did the Monzo board have anyone with genuine AML expertise on its board?
The AML control weaknesses called out are core controls and the FCA suggest Monzo put onboarding speed and reduced friction ahead of compliance. If true, and this would be no surprise to many, especially those in traditional Banks at the time – would raise questions about whether competition and growth factors generate potential supervision conflicts of interests and or whether the original owners were the right investors even for a start up bank. The FCA can have an interest in growth and competition but not if it ever compromises its primary supervisory function.
Still Monzo now has 12 million customers and is profitable. Changes in management have happened and this fine will soon be history. Still, If AML fines for serious violations are not just costs of doing business or worse costs of growing businesses, the fight against financial crime will be in big trouble.
For the materials see the links in the comments: See: https://www.fca.org.uk/news/press-releases/fca-fines-monzo-21m-failings-financial-crime-controls & https://www.fca.org.uk/publication/final-notices/monzo-bank-limited.pdf
See below a comparison of UK AML fines since 2017, including the recent Monzo fine..
