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By imposing the fine on the challenger bank, the UK financial services regulator has sent a reminder to disruptors that they must pay attention to their regulatory duties.
Earlier this week, the Financial Conduct Authority (FCA) fined Monzo Bank Ltd £21m for having inadequate anti-financial crime systems and controls for the period October 2018 to August 2020.
The regulator highlighted that the challenger bank failed to design, implement, and maintain adequate customer onboarding, customer risk assessment, and transaction monitoring systems to mitigate the risk of financial crime.
These failings led the FCA to demand an independent review of the firm's financial crime framework in August 2020, and to impose a requirement preventing it from opening new accounts for high-risk customers.
However, Monzo failed to comply with the requirement, notably by signing up more than 34,000 high-risk customers between August 2020 and June 2022.
“Banks are a vital line of defence in the collective fight against financial crime. They must have the systems in place to prevent the flow of ill-gotten gains into the financial system. Monzo fell far short of what we, and society, expect”, said Therese Chambers, the FCA’s joint executive director of enforcement and market oversight.
“Monzo onboarded customers on the basis of limited, and in some cases, obviously implausible information – such as customers using well-known London landmarks as an address. This illustrates how lacking Monzo's financial crime controls were. This was compounded by its inability to properly comply with the requirement not to onboard high-risk customers.”
A risky environment
Monzo is one of several neobanks that have gained popularity in the UK due to their user-friendly technology and quick, straightforward onboarding.
The FCA said that Monzo’s customer base increased from around 600,000 in 2018 to more than 5.8 million in 2022, and it seems that the organisation’s financial crime controls did not keep pace with this significant level of growth.
This was a danger that the FCA had recognised – in a 2022 review of financial crime controls at challenger banks it identified weaknesses that “create an environment for more significant risks of financial crime to occur both when customers are onboarded and throughout the customer journey.”
The regulator’s scrutiny of neobanks’ operations has led to enforcement action on more than one occasion, and firms should keep in mind that it is paying attention to their practices.
On announcing the fine, the FCA noted that Monzo has established and completed a financial crime change programme to remediate and enhance its wider financial crime control framework, and thus qualifies for a 30% discount – otherwise it would have been fined just over £30m.
This latest enforcement action follows a similar fine imposed on another UK neobank, Starling, in October 2024.
In that case the FCA fined the organisation £28m for failing to maintain adequate financial crime systems and controls, particularly in its financial sanctions screening.
Like Monzo, Starling implemented programmes to remediate its failures and strengthen its financial crime control framework, and qualified for a 30% discount.
Growth, but not at any price
The FCA has a secondary objective of ensuring the international competitiveness of the economy of the UK and its growth in the medium to long term, and has been vocal in its support for the Labour government’s growth agenda.
Nevertheless, its fine of Monzo is a reminder that it is still paying attention to the need to maintain high standards of regulatory compliance.
Monzo has been known for its fast and user-friendly onboarding process, with consumers able to open an account in minutes.
However, the enforcement shows that, for at least the period between 2018 and 2022, this came at the cost of proper customer risk assessment and transaction monitoring.
The FCA’s actions should act as a reminder to challenger banks and other financial services disruptors of both their critical role in protecting the financial system from criminal activity and the regulator’s readiness to take firm action against breaches.
The regulator noted that the Monzo fine is the 10th it has imposed on a bank for financial crime control failings in the past four years, and the UK is not the only jurisdiction seeking to ensure compliance through enforcement action.
In April 2025, for example, as covered by Vixio, the Bank of Lithuania fined Revolut €3.5m after a scheduled inspection uncovered breaches of anti-money laundering (AML) requirements.
AML is a key area of enforcement activity, particularly in Europe – Vixio’s 2024 Enforcement Outlook found that violations of AML requirements accounted for more than half of all the enforcement activity in the UK and the EU during the first half of last year, and that trend remains strong.
The EU’s new Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) has been created to counter the challenge of inadequate AML compliance, and will be scrutinising the efforts of financial institutions under its supervision.
Banks and other financial institutions should take the opportunity to review their customer onboarding, customer risk assessment and transaction monitoring systems to ensure that they are not at risk of becoming the next organisation to be hit with a significant fine.
