Nationwide has been fined £44 million over failings in its anti-money laundering systems between October 2016 and 2021 that allowed millions of pounds of fraudulent payments to be deposited into current accounts.
One of the most serious cases involved a customer who was able to receive £27.3 million in fraudulent Covid furlough payments over 13 months. The criminal deposited £26 million of this into their personal Nationwide current account over just eight days.
The fine is the largest penalty ever issued to Nationwide by the Financial Conduct Authority (FCA).
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
An investigation by the financial regulator found Nationwide had “ineffective systems” for performing due diligence and risk assessments on its customers and for correctly monitoring their transactions.
Latest Videos FromMoneyWeek
The FCA also found the building society was aware that some of its customers were using their personal current accounts for business activity – a breach of its own terms.
At the time, Nationwide did not offer business accounts and so did not have the correct processes in place to manage the financial crime risks that come with business activity.
It was therefore unable to effectively identify and manage money laundering risks among its customers with personal current accounts, while also not having an accurate picture of which of its customers presented a higher risk of financial crime.
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.”
Nationwide fine reduced thanks to full cooperation
The watchdog says Nationwide cooperated fully with their investigation and that the building society has invested significantly in its financial crime processes since July 2021.
It added that the building society was initially set to be fined just under £63 million, but qualified for a 30% discount after it agreed to resolve the matter.
Since 2021, the FCA has imposed 13 fines, totalling just under £301 million, on banks for anti-money laundering systems and controls failings.
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.”
