The Financial Conduct Authority (FCA) has fined Swindon-Headquartered Nationwide Building Society £44 million for failing to maintain adequate anti-financial crime systems and controls between October 2016 and July 2021.
The regulator said Nationwide’s systems were ineffective for maintaining up-to-date due diligence and risk assessments for all personal current account customers, as well as for monitoring their transactions. Nationwide was aware that some customers were using personal accounts for business activity, in breach of its terms. At the time, Nationwide did not offer business current accounts and therefore lacked processes to manage the associated financial crime risks.
The FCA added that Nationwide was “unable to effectively identify, assess, monitor or manage the money laundering risks among its personal current account customers” and “did not have an accurate picture of its customers who presented a higher risk of financial crime.”
In a serious instance, Nationwide failed to spot a customer using personal current accounts to receive fraudulent Covid furlough payments. The customer received 24 payments totalling £27.3 million over 13 months, with £26.01 million deposited in just eight days. HMRC recovered £26.5 million, but roughly £800,000 remains unrecovered.
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. Building societies and banks have a key role in the fight against financial crime. Firms must remain vigilant in this fight.”
The FCA noted that Nationwide was aware of weaknesses in its systems and controls and had begun work to improve them. However, the building society, headquartered in Swindon, failed to address these weaknesses promptly. Nationwide launched a large-scale financial crime transformation programme in July 2021.
A spokesperson for Nationwide 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. Since 2021, Nationwide has invested significantly in all aspects of its economic crime control framework in order to ensure our systems are robust. We do not believe that these controls issues caused financial loss to any of our customers and remain committed to preventing economic crime and protecting our customers and the wider UK economy from fraud.”
