The FCA has fined Nationwide Building Society £44 million over weaknesses in its financial crime prevention systems.
Between October 2016 and July 2021, Nationwide had ineffective systems for keeping up-to-date due diligence and risk assessments for all its personal checking account customers and for monitoring their transactions, the regulator found.
Nationwide was also aware that some of these customers were using their personal accounts for business activities in violation of their terms.
In one serious case, Nationwide missed opportunities to identify a customer using personal checking accounts to receive fraudulent Covid furlough payments.
The client received 24 payments totaling £27.3 million over 13 months, of which £26.01 million was deposited over eight days.
HMRC has recovered £26.5 million, but around £800,000 remains outstanding.
Nationwide did not currently offer business checking accounts and therefore did not have the appropriate processes in place to manage the risks of financial crime arising from business activities.
This meant that Nationwide could not effectively identify, assess, monitor or manage money laundering risks among its personal checking account customers.
It also meant that Nationwide did not have an accurate picture of its customers who posed a higher risk of financial crime.
Therese Chambers, FCA joint executive director of enforcement and market surveillance, said: “Nationwide has failed to get a good handle on the risks of financial crime lurking within its customer base.
“It took too long to address the flawed systems and weak controls, resulting in missed warning signals with serious consequences.
“Building companies and banks play a key role in the fight against financial crime.
“Companies must remain vigilant in this fight.
“Nationwide was aware of the weaknesses in its systems and controls and undertook efforts to make improvements.
“However, it has not been possible to adequately address these shortcomings in a timely manner.
“Nationwide subsequently embarked on a major financial crime transformation program in July 2021.”
A spokesperson for Nationwide Building Society said: “Nationwide has 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 has co-operated fully with the FCA investigation and we regret that our controls during the period have fallen below the high standards we expect.
“Since 2021, Nationwide has invested significantly in all aspects of its economic crime management framework to ensure our systems are robust.
“We do not believe these control issues have caused financial loss to our customers and remain committed to preventing economic crime and protecting our customers and the wider UK economy from fraud.”