In the beginning…
When it launched in 2015, Monzo, attempted to cut a new lane in the banking sector by introducing itself as a fresh, tech-oriented, consumer-friendly bank. Its approach appealed to a young demographic, with 75% of the client base being between the ages of 22 and 37.
In 2024, with customer deposits reaching over £11 billion and a customer card spend of £47.8 billion, Monzo has grown very rapidly.
The UK regulator takes notice
As is often the case, surges in demand early on in a firm’s existence meant that Monzo’s compliance functions and internal business processes struggled to cope. When combined with a lack of face-to-face contact, Monzo’s operating models helped to create an almost perfect storm for gaps to arise in its management of financial crime risk.
On 8 July, the FCA fined Monzo Bank £21,091,300, with this amount having been reduced by 30% from £30,130,475 for their early co-operation in agreeing to resolve these matters. The fine stemmed from repeated breaches against opening accounts for customers deemed as high-risk, with extreme examples of poor handling being highlighted after multiple clients were able to be accepted using either Buckingham Palace, 10 Downing Street or even Monzo’s own headquarters as their home address.
The FCA’s Therese Chambers said that “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.”
Due to their ever-increasing popularity, digital banks are receiving even more attention from the FCA, with Monzo not being the first to receive such a hefty penalty. In Q4 2024, Starling Bank were fined over £28 million after a review found they had opened ‘over 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023’.
Future growth
It is essential that firms learn from these types of experience and that they apply enhanced levels of care and due diligence in the future to avoid further censure from the regulator and to ensure that its brand does not suffer from a drop in consumer confidence.
How robust are your firm’s financial crime controls?
In this area, prevention is clearly better than cure, both from a financial and reputational perspective. At fscom, we have the skills and expertise to help support and enable your business to embed an appropriate suite of financial crime controls. Please contact us, and we can discuss how we may be able to help your business.
This post contains a general summary of advice and is not a complete or definitive statement of the law. Specific advice should be obtained where appropriate.
