By PAUL O’DONOGHUE, Senior Correspondent
THE UK’s FCA has fined Nationwide Building Society £44m ($59 million) for ‘inadequate’ anti-financial crime controls.
The FCA (Financial Conduct Authority) said that Nationwide had ineffective systems for due diligence and risk assessments between October 2016 to July 2021.
This applied to all its personal current account customers and for monitoring their transactions.
Nationwide knew some of those customers were using their personal accounts for business activity, in breach of terms. The organization did not offer business current accounts at this point. This meant it did not have the right processes in place to manage the financial crime risks from business activity.
“In one serious case, Nationwide missed opportunities to identify a customer using personal current accounts to receive fraudulent Covid furlough payments,” the FCA said.
“The customer received 24 payments totalling £27.3m over 13 months, with £26.01m of this deposited over 8 days.
“HMRC recovered £26.5m, but approximately £800,000 remains unrecovered.”
‘Weak controls’
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.”
She added: “Building societies and banks have a key role in the fight against financial crime. Firms must remain vigilant in this fight.’
The FCA said Nationwide was aware of weaknesses in its systems and controls. “[It] undertook work to make improvements,” it said.
“However, it failed to adequately address those weaknesses in a timely manner. Nationwide subsequently commenced a large-scale financial crime transformation programme in July 2021.”
Nationwide faced being fined up to £63 million. However, after agreeing to resolve the issues, it qualified for a 30% discount under the FCA’s processes
A spokesperson for Nationwide Building Society said: “Nationwide identified these issues, which relate to controls in place before July 2021, through its own reviews, and voluntarily brought them to the attention of the FCA.
“The Society cooperated fully with the FCA investigation, and we are sorry that our controls during the period fell below the high standards we expect.”
Phil Cotter, the CEO of digital compliance firm SmartSearch, said the penalty “marks yet another reminder that financial-crime controls across the industry still aren’t functioning as they should”.
“Too often, AML and risk systems are approached as administrative obligations. Rather than essential protections against fraud and criminal activity,” he said.
“The message should be clear: firms need to take a hard look at their systems, invest in modern compliance technology and build a culture where robust financial-crime prevention is non-negotiable and led from the top.”
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