- with readers working within the Banking & Credit industries
Niall Hearty of Rahman Ravelli outlines how the building society's shortcomings proved costly.
The Nationwide building society has been fined £44 million by the Financial Conduct Authority (FCA) for having inadequate anti-financial crime systems and controls in place.
The fine was imposed for the Nationwide having, between October 2016 and July 2021, ineffective systems for keeping up-to-date due diligence and risk assessments for all its personal current account customers and for customer transaction monitoring failings in the same period.
The Nationwide was aware that some of those customers were using their personal accounts for business activity, which was in breach of its terms. It did not offer business current accounts at this point, so did not have the right processes in place to manage the financial crime risks from such business activity.
This, according to the FCA, meant that the Nationwide was unable to effectively identify, assess, monitor or manage the money laundering risks among its personal current account customers. It also meant that the building society did not have an accurate picture of its customers who presented a higher risk of financial crime.
Opportunities
In one case, it missed opportunities to identify a customer using personal current accounts to receive fraudulent Covid furlough payments. The customer received 24 payments totalling £27.3 million over 13 months, with £26.01m of this deposited over eight days. HM Revenue & Customs (HMRC) recovered £26.5 million of this, but approximately £800,000 remains unrecovered.
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said:
"Nationwide failed to get a proper grip of the financial crime risks lurking within its customer base. It took too long to address its flawed systems and weak controls, meaning red flags were missed with serious consequences.
"Building societies and banks have a key role in the fight against financial crime. Firms must remain vigilant in this fight.''
The Nationwide was aware of the weaknesses in its systems and controls and started to make improvements. But the FCA said the building society failed to adequately address those weaknesses in a timely manner. The Nationwide then began a large-scale programme of change to its financial crime processes in July 2021.
The Nationwide fine, while embarrassing for a high street institution, comes relatively soon after the Barclays (£42 million) and Monzo (£21 million) fines for similar shortcomings. This new fine should serve as an end-of-the-year warning to all UK financial institutions that their regulator will not tolerate shortcomings with anti-money laundering systems and controls, nor poor handling of financial crime risks generally. It is a strong reminder of the need for robust, regularly-reviewed anti-money laundering policies.
Perhaps a reminder that serious shortcomings will not be tolerated and more robust AML policies need to be implemented and constantly reviewed.
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