FCA Fines Nationwide Building Society £44m for AML and Financial Crime Control Failures

Nationwide Building Society has been fined £ 44 million by the UK Financial Conduct Authority (FCA) due to major failures in its anti-money laundering (AML) and financial crime controls and systems between October 2016 and July 2021.

The FCA indicated that Nationwide failed to have effective customer due diligence (CDD) and continued risk assessment and monitoring of its personal current account customers. These were the areas of weakness that prevented the firm not to identifying, measuring, and managing the risk of money laundering and fraud appropriately in its customer base.

One of the significant compliance failures that the regulator identified was the fact that Nationwide knew that some of its customers were using their personal accounts to conduct business contrary to its terms and conditions. Nationwide was not providing business current accounts during the period considered; it also lacked the right AML frameworks to handle more financial crime risk related to transactions involving business.

Consequently, Nationwide lacked a correct risk profile of the customers who pose high financial crime risk, which resulted in missed red flags and the lack of timely action.

Missed Detection of £27.3m Covid Furlough Fraud

In a severe instance, Nationwide could not identify a client who had multiple personal current accounts to get the fraudulent Covid-19 furlough payments. During 13 months, the customer was paid 24 payments totalling 27.3 million, of which 26.01 million was paid in only eight days.

Although His Majesty’s Revenue and Customs (HMRC) was able to reclaim the sum of 26.5 million, it failed to recover the part of the fraudulent money, which is about £800,000, and these facts demonstrate the material implications of poor AML monitoring.

FCA Enforcement Action and Regulatory Warning

Joint Executive Director of Enforcement and Market Oversight, Therese Chambers, of the FCA said:

Nationwide did not place a proper hold on the financial crime risks that were hiding in its customer base. It was already too late to fix its faulty systems and poor controls, i.e. the red flags were overlooked and hence taken seriously.

Nationwide has recognised the above-defined shortcomings and ensured that it has been improving on its AML control, customer risk evaluation, and transaction monitoring systems since then.

Also Read: UK Financial Fraud Tops £1.2 Billion in 2022