Metro Bank fined £16.7 million for financial crime failings

Metro Bank has been fined £16.7 million by the Financial Conduct Authority (FCA) after an automated system the brand setup to monitor transactions failed to spot potential cases of financial crime.

Under FCA rules, banks are required to have anti-money laundering systems in place to check customer accounts and ensure money isn’t being used for illegal or suspicious purposes.

But the City watchdog revealed this morning that between June 2016 and December 2020, Metro Bank, which has had some of the best savings rates so far this year, failed to have the right systems and controls to adequately monitor more than 60 million transactions, with a value of more than £51 billion for money laundering risks.

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Therese Chambers, joint executive director of enforcement and market oversight, said: “Metro's failings risked a gap being left in our defence against the criminal misuse of our financial system.

“Those failings went on for too long.”

The fine comes just weeks after Starling Bank received a £29 million penalty from the FCA for ‘shockingly lax’ financial crime controls.

Why did the FCA fine Metro Bank?

An investigation by the regulator found that Metro Bank created an automated transaction monitoring system (ATMS) in June 2016 to check customer transactions for potential financial crime.

However, it did not work as intended and an error in how data was fed into the system meant transactions taking place on the same day an account was opened and any further transactions until the account record was updated were not monitored.

The FCA said junior staff did raise concerns about some transaction data not being monitored in 2017 and 2018, but nothing was fixed.

Even once a fix had been put in place in July 2019, Metro Bank did not have a mechanism to consistently check that all relevant transactions were being recorded properly until December 2020 - more than four and a half years after the system was implemented, the FCA said.

Once Metro Bank looked into the issues, it submitted 153 suspicious activity reports and 43 notices to customers closing their accounts.

Has Metro Bank improved its monitoring systems?

Metro Bank identified the errors in 2019 and has since fixed them, the FCA said.

The bank would have been fined £23.8 million but it agreed to resolve these matters and so qualified for a 30% discount under the FCA’s processes.

Daniel Frumkin, chief executive of Metro Bank, said in a stock market update this morning that the conclusion of these enquiries draws a line under this “legacy issue”.

He said: “We are continuing, at pace, our shift towards higher yielding specialist mortgages and commercial, corporate and SME lending with a strong pipeline of business.”

The bank also released a third quarter trading update this morning that said it was profitable on an underlying basis.

Total net loans as of 30 September 2024 were £9.1 billion, down 22% since June 2024, reflecting the completion of the £2.5 billion mortgage portfolio disposal.

Metro Bank said it continues to strategically reposition its balance sheet towards higher yielding commercial, corporate, small business and specialist mortgages.

It has also axed fee-free debit card transactions in Europe.

Customer deposits were also down from £15.7 billion in June to £15.1 billion at the end of September.

Frumkin said this reflects “significant progress” in delivering on the bank’s strategic priorities.

He added: “Our relationship-led banking model will allow Metro Bank to go from strength to strength as we forge ahead with our growth agenda and progress towards long term sustainable profitability.”