Nationwide Penalized £44 Million for Inadequate Crime Prevention Measures

Nationwide has incurred a fine of £44 million due to its failure to implement effective systems for detecting financial crime from 2016 to 2021. The Financial Conduct Authority (FCA) criticized the building society for its “ineffective systems” in evaluating risk and overseeing customer transactions.

During the investigated period, Nationwide overlooked critical signs of suspicious activity, notably missing the chance to flag £26 million in fraudulent Covid furlough payments deposited into a single personal account within just eight days.

The building society stated that it had fully cooperated with the FCA’s inquiry and has since made substantial investments in its crime prevention measures to enhance their reliability. Notably, Nationwide did not provide business accounts during the timeframe under scrutiny.

Regulatory Findings

The FCA highlighted that although Nationwide recognized that some clients were misusing personal accounts for business activities, it lacked a comprehensive understanding of which customers posed a greater risk for financial crime. Consequently, the monitoring of money laundering threats was inadequate.

The account that received the unauthorized furlough payments amassed £27.3 million over a period of 13 months, with most of those funds now reclaimed by the tax authority.

The FCA emphasized that Nationwide’s internal controls should have facilitated a more prompt investigation into the unusual activities detected.

Government Support and Oversight

During the Covid pandemic, the government allocated furlough or Job Retention Scheme (JRS) funds to support businesses. The FCA noted that the receipt of such funds was a strong indicator that an account was being utilized for commercial purposes.

In total, £64 million in JRS funds were deposited into over 5,000 personal accounts at Nationwide, which raised concerns regarding the institution’s oversight.

“Nationwide failed to adequately understand the financial crime risks embedded within its customer base,” noted Therese Chambers, joint executive director of enforcement and market oversight at the FCA.

Chambers further commented, “The institution took an excessive amount of time to rectify its deficient systems and weak controls, resulting in significant red flags being overlooked with serious repercussions.”

In response, Nationwide acknowledged the deficiencies identified through its internal reviews and reported them to the FCA. A spokesperson stated, “We regret that our controls during this period did not meet the high standards we uphold.”

Since 2021, Nationwide has made considerable investments in its economic crime control framework to ensure its systems are robust. The spokesperson added, “We do not believe that these control issues led to any financial losses for our customers and remain dedicated to combating economic crime while safeguarding our customers and the broader UK economy from fraud.”