FCA Imposes £44m Penalty on Nationwide Over Prolonged AML Control Failures

The Financial Conduct Authority has handed Nationwide Building Society a £44m fine after finding serious shortcomings in its anti-money laundering and financial crime controls over a period of several years.

According to the UK regulator, Nationwide operated with inadequate anti-financial crime systems and controls between October 2016 and July 2021. During this time, those controls failed to effectively monitor transactions carried out by customers holding personal current accounts.

The FCA found that Nationwide was aware that some customers were breaching account rules by using personal current accounts for business purposes, yet it failed to take sufficient action. The building society also lacked appropriate processes to properly manage the heightened financial crime risks associated with business activity flowing through personal accounts. As a result, Nationwide was unable to effectively identify, assess, monitor, or manage money laundering risks within its personal current account customer base.

In highlighting the consequences of these weaknesses, the FCA pointed to a specific case in which Nationwide missed multiple opportunities to detect suspicious activity. One customer used personal current accounts to receive fraudulent Covid furlough payments, collecting 24 payments over a 13-month period that totalled £27.3m. Of this amount, £26m was paid into the accounts within just eight days. While HM Revenue & Customs was able to recover £26.5m, approximately £800,000 remains unrecovered.

Therese Chambers, joint executive director of enforcement and market oversight at the FCA, criticised the building society’s response to the risks it faced. She 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.”

Nationwide has since taken steps to address the issues identified by the regulator, launching a financial crime transformation programme in July 2021 aimed at strengthening its systems and controls.

By fLEXI tEAM