Nationwide slapped with £44m fine over prolonged financial crime control failures

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The Financial Conduct Authority (FCA) has fined Nationwide Building Society £44m after finding widespread failings in its anti-financial crime framework over nearly five years.

The regulator said the shortcomings, which spanned from October 2016 to July 2021, left the Nationwide unable to identify or manage money laundering risks across its personal current account customer base.

The failings covered outdated due diligence records, weak risk assessments and insufficient transaction monitoring.

The Nationwide also knew that some personal current account customers were using their accounts for business purposes, despite this breaching its terms. As the Society did not offer business current accounts at the time, it lacked appropriate systems to assess the higher risks linked to business activity.

The FCA said this further undermined the Nationwide’s ability to build an accurate picture of customer behaviour and spot warning signs.

One particularly serious case involved a customer who received fraudulent Covid furlough payments. Over a 13 month period, the individual received 24 payments totalling £27.3m, with £26.01m deposited within eight days. HMRC later recovered £26.5m, but approximately £800,000 remains outstanding.

Therese Chambers, the FCA’s joint executive director of enforcement and market oversight, 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.

According to the regulator, the Nationwide was aware of weaknesses in its systems and had begun work to improve processes, but did not resolve the issues quickly enough. The Society launched a large-scale financial crime transformation programme in July 2021, shortly before the end of the period under review.

IMPLICATIONS FOR THE WIDER MARKET

The action serves as a reminder to lenders and financial institutions of the regulatory expectation for continuous monitoring, robust customer profiling and effective controls.

With property transactions and client money flows often intersecting with the banking sector’s systems, the FCA’s stance underlines the importance of reliable safeguards across all parts of the financial ecosystem on which the property market depends.

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