Nationwide Building Society faced a £44 million penalty for having inadequate measures in place to detect financial crime from 2016 to 2021. The Financial Conduct Authority (FCA) described Nationwide’s risk assessment and transaction monitoring as ineffective, leaving gaps in the detection of illicit activity. In one troubling case, the account holder received £26 million in fraudulent Covid furlough payments over just eight days, exposing a missed opportunity to spot abnormal activity.
Nationwide has stated it fully cooperated with the regulator and has since strengthened its crime-control systems to be robust and reliable. The penalty period coincided with a time when Nationwide did not offer business accounts. The FCA noted that, even though some customers used personal accounts for business activity, Nationwide did not have an accurate view of which customers posed higher financial-crime risk, resulting in insufficient monitoring of money-laundering risk.
The personal account holder who received the illegitimate furlough funds obtained £27.3 million over 13 months; while most of it has been recovered by the tax authority, not all of the funds were recovered.
The FCA added that Nationwide’s controls should have triggered a faster review of unusual activity. The government’s Covid-19 Job Retention Scheme (furlough) payments were cited as a strong indicator that an account might be used for business purposes. In total, £64 million of JRS funds were paid into more than 5,000 Nationwide personal accounts.
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, stated that Nationwide failed to secure a proper grip on financial-crime risks within its customer base, and took too long to fix its flawed systems, allowing red flags to go unchecked with serious consequences.
Nationwide noted that it identified the shortcomings through internal reviews and disclosed them to the FCA. A spokesperson apologized, saying the period’s controls did not meet the high standards expected. Since 2021, Nationwide has significantly invested in its entire economic-crime-control framework to ensure its systems are robust. The bank maintains that these issues did not cause financial losses to customers and reaffirms its commitment to preventing economic crime and protecting customers and the broader UK economy from fraud.
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