FCA Slaps Nationwide With £44 Million Fine After Prolonged AML Failures

Key Takeaways

• Years-long weaknesses: Nationwide’s financial crime controls were found to be inadequate between 2016 and 2021.
• Risk visibility failures: Weak due diligence and monitoring left the firm without an accurate view of higher-risk customers.
• Covid fraud exposure: One customer fraudulently received £27.3 million in furlough payments, with £800,000 still outstanding.
• Reduced penalty: The £44.08 million fine reflects a 30 percent settlement discount from the original amount.

Deep Dive

Nationwide Building Society has been hit with a £44 million fine after the UK’s financial watchdog found that long-standing weaknesses in its financial crime controls left it exposed to money laundering risks for years.

The Financial Conduct Authority said that between October 2016 and July 2021, Nationwide failed to maintain effective systems for carrying out customer due diligence, keeping risk assessments up to date, and monitoring transactions across its personal current account customers. As a result, the building society did not have a clear picture of which customers posed higher financial crime risks or how those risks were changing over time.

According to the regulator, the problems were not abstract or technical. Nationwide knew that some customers were using personal current accounts to run business activity, despite this breaching its terms and conditions. At the time, Nationwide did not offer business current accounts, and crucially, did not have the processes in place to manage the additional money laundering risks that business activity can bring.

That blind spot had serious consequences. In one case highlighted by the FCA, Nationwide missed repeated opportunities to identify a customer who was using personal accounts to receive fraudulent Covid furlough payments. Over a 13-month period, the customer received 24 payments totaling £27.3 million, including £26.01 million paid in over just eight days. While His Majesty’s Revenue & Customs later recovered £26.5 million, around £800,000 remains unrecovered.

Therese Chambers, the FCA’s joint executive director of enforcement and market oversight, said the case showed what can happen when known weaknesses are allowed to persist.

“Nationwide failed to get a proper grip of the financial crime risks lurking within its customer base,” Chambers said. “It took too long to address its flawed systems and weak controls, meaning red flags were missed with serious consequences.”

She added that banks and building societies have a central role in tackling financial crime and must remain vigilant.

The FCA said Nationwide was aware of shortcomings in its systems and had started work to improve them, but failed to address the issues quickly or thoroughly enough. It was not until July 2021 that the firm launched a large-scale financial crime transformation program.

The £44.08 million penalty reflects a 30 percent reduction from an initial £62.97 million figure, after Nationwide agreed to settle the case under the FCA’s early resolution process.

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