The FCA has fined Monzo more than £21 million for failings across the challenger bank’s financial crime controls.

Announcing the fine, the financial watchdog said that Monzo had ‘inadequate’ anti-financial crime systems and controls in place between October 2018 and August 2020.

Going further, the FCA said that it also found the digital bank had repeatedly breached rules preventing it from opening accounts for high-risk customers between August 2020 and June 2022.

According to the FCA, while Monzo’s customer base has grown rapidly, increasing almost tenfold from around 600,000 in 2018 to over 5.8 million in 2022, the bank’s financial crime controls failed to keep pace with this explosion in growth.

In particular, the FCA claimed that Monzo had failed to design, implement and maintain adequate customer onboarding, customer risk assessments and transaction monitoring systems to mitigate the risk of financial crime.

These failings resulted in the FCA requiring a comprehensive, independent review of the firm’s financial crime framework in August 2020, with the regulator imposing a requirement preventing Monzo from opening new accounts for high-risk customers.

However, between August 2020 and June 2022, Monzo reputedly failed to comply with the terms of the requirement, with the FCA saying the bank signed up more than 34,000 high-risk customers over that time.

“Monzo onboarded customers on the basis of limited, and in some cases, obviously implausible information, such as customers using well-known London landmarks as an address,” said Therese Chambers, FCA joint executive director of enforcement and market oversight.

“This illustrates how lacking Monzo’s financial crime controls were. This was compounded by its inability to properly comply with the requirement not to onboard high-risk customers.

“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. Monzo fell far short of what we, and society, expect.”

Since then, the FCA acknowledged that Monzo has established and completed a financial crime change programme to remediate its wider financial crime controls in line with recommendations made in the independent review.

Speaking to the Independent, TS Anil, Monzo’s group chief executive said: “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.

“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.”

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While this latest fine puts an end to the FCA’s investigation of Monzo, it is evidence that the regulator is still serious about plugging the gaps in the UK’s anti-money laundering and financial crime rules.

In 2022, the FCA published the results of another review into challenger banks’ financial crime controls after a bump in the number of Suspicious Activity Reports, which raised concerns about the adequacy of checks when these banks were taking on new customers.

That report found some evidence of good practice, but also some basic mistakes, with some banks failing to adequately check their customers’ income and occupation, and in other instances, not having financial crime risk assessments in place for their customers.

Following that review, the FCA last year fined Starling Bank £29 million for failings in its financial crime controls, citing serious concerns after the challenger bank opened over 54,000 accounts for thousands of “high-risk” customers.