Nationwide fined £44m for inadequate crime controls

Nationwide has been fined £44m for not having the right processes in place for detecting financial crime between 2016 and 2021.

The building society had “ineffective systems” for assessing risk and monitoring the transactions of its customers, the Financial Conduct Authority (FCA) said.

In one instance, Nationwide missed opportunities to identify unusual activity after £26m of fraudulent Covid furlough payments were paid into one personal account in the space of just eight days.

Nationwide said it had fully co-operated with the regulator’s investigation and since 2021 had invested in its crime control systems to ensure they were “robust”.

During the period in question Nationwide did not offer business accounts.

The FCA said that even though the building society was aware that some customers were using personal accounts for business activity, it did not have an accurate picture of who presented a higher risk of financial crime.

As a result money laundering risks were not effectively monitored, it said.

The customer who banked the illegitimate furlough payments received a total of £27.3m over 13 months. Most, but not all of it, has since been recovered by the tax authority.

The FCA said Nationwide’s controls should have prompted a review of the unusual activity more quickly than it did.

The government provided furlough or Job Retention Scheme (JRS) funds to support firms during the Covid pandemic. The receipt of JRS funds was a strong indication that an account was being used for business purposes, the FCA said.

In all, £64m of JRS funds were paid into more than 5,000 personal accounts at Nationwide, it said.

“Nationwide failed to get a proper grip of the financial crime risks lurking within its customer base,” said Therese Chambers, joint executive director of enforcement and market oversight at the FCA.

“It took too long to address its flawed systems and weak controls, meaning red flags were missed with serious consequences,” she said.

The Nationwide said it had identified the shortcomings through its own reviews and had brought them to the attention of the FCA.

“We are sorry that our controls during the period fell below the high standards we expect,” a spokesperson said.

“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,” they added.