Nationwide Hit With £44m Fine Over Major Financial Crime Control Failures
There’s been significant news involving Nationwide Building Society, after it was fined a hefty £44 million by the UK’s financial watchdog for serious weaknesses in its crime prevention systems. The fine was imposed by the Financial Conduct Authority, which said Nationwide failed to put effective controls in place to detect and monitor financial crime over a period stretching from 2016 to 2021.
At the heart of the issue was the way customer risk was assessed and how unusual transactions were monitored. It was found that Nationwide’s systems were simply not robust enough, and as a result, red flags were missed. One of the most striking examples involved Covid furlough payments. In a single case, around £26 million in fraudulent furlough funds was paid into just one personal account in the space of eight days. Over a longer period of 13 months, that same account received a total of £27.3 million.
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What made this particularly serious was that Nationwide did not offer business accounts at the time. Even though it was aware that some customers were using personal accounts for business-related activity, there was no clear or accurate picture of which customers posed a higher risk. Because of this, money laundering risks were not monitored effectively, and suspicious activity was not reviewed quickly enough.
The FCA pointed out that receiving Job Retention Scheme, or furlough, payments was a strong indicator that an account was being used for business purposes. Despite this, about £64 million of furlough funds ended up being paid into more than 5,000 personal accounts at Nationwide. In the most severe case, tax authorities were able to recover most of the stolen money, but around £800,000 remains unrecovered, meaning UK taxpayers ultimately bore the loss.
The regulator was blunt in its assessment. It was said that Nationwide failed to get a proper grip on the financial crime risks within its customer base, and that action to fix flawed systems came far too late. According to the FCA, building societies and banks play a crucial role in preventing fraud, and vigilance is non-negotiable.
Nationwide has responded by saying it fully cooperated with the investigation and had itself identified the shortcomings through internal reviews. The issues were voluntarily reported to the regulator, and since 2021, significant investment has been made to overhaul its economic crime control framework. The building society also stated that it does not believe customers suffered financial losses as a result of these failures.
While Nationwide has apologised and insists its systems are now far stronger, the case serves as a stark reminder of how costly weak financial crime controls can be, not just for institutions, but for the wider economy as well.
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