Nationwide fined £44m by watchdog for financial crime control failings

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Nationwide has been fined £44m by the City watchdog over “weak” financial crime controls that culminated in a serious case of Covid fraud that cost UK taxpayers £800,000.The Financial Conduct Authority (FCA) fined the building society for failures stretching over nearly five years.It said the lender had been aware that some customers were using personal accounts for business activity, in a breach of its own terms.Nationwide did not offer business accounts at that point and so did not have the right processes in place to monitor potential financial crime risks, the FCA said.This resulted in a case where Nationwide failed to catch a customer using personal current accounts to receive 24 fraudulent Covid furlough payments, totalling £27.

3m over 13 months.About £26m of that sum was deposited in only eight days.While HM Revenue and Customs has managed to claw back £26.5m from the fraudster, approximately £800,000 remains unrecovered, leaving taxpayers out of pocket because of Nationwide’s failures.Therese Chambers, a joint executive director of enforcement and market oversight at the FCA, said: “Nationwide failed to get a proper grip of the financial crime risks lurking within its customer base.

It took too long to address its flawed systems and weak controls, meaning red flags were missed with serious consequences,“Building societies and banks have a key role in the fight against financial crime,Firms must remain vigilant in this fight,”The wider failures at Nationwide related to October 2016 to July 2021, when the chief executive was Joe Garner,While Nationwide tried to make improvements, the FCA said it “failed to adequately address those weaknesses in a timely manner”.

It was later forced to undertake a large-scale financial crime transformation programme, in July 2021.That transformation continued until summer 2024, during which it launched a £2.9bn takeover of its rival Virgin Money under Garner’s successor, the current Nationwide CEO, Debbie Crosbie.Crosbie has since faced her own controversies, including over a 43% increase in her maximum annual pay to £7m, which board members said reflected her new demands after the takeover.Members of the mutual have labelled the payout an “obscenity” and hypocritical.

Crosbie was made a dame in the king’s birthday honours this summer and was appointed the new Women in Finance champion by the chancellor, Rachel Reeves, this week.In the case of the customer who took £27.3m in furlough payments, the FCA said Nationwide had failed to block the account despite a number of red flags, including in 2014, when the application listed an office as the customer’s residential address.The customer tried to make changes to their address 11 times; one of the addresses given was also the registered address of 59,666 other companies.The customer tried to apply for 20 current accounts, savings accounts and credit cards, many of which were abandoned or denied.

That included in 2019 and 2020, when the name and address was flagged on a fraud network match alert.The same customer went on to fraudulently apply for a number of Covid furlough payments during the pandemic.By the time the tax authorities identified the fraud and secured orders to freeze the account, more than £800,000 had been transferred out and was never recovered.The FCA fine came days after the independent Covid counter-fraud commissioner, Tom Hayhoe, released a final report showing that fraud and errors had caused a £10.9bn loss to UK taxpayers during the pandemic.

Nationwide said in a statement: “We are sorry that our controls during the period fell below the high standards we expect.” A spokesperson said the building society had identified the issues through its own reviews, voluntarily brought it to the attention to the FCA and “cooperated fully” with the regulator’s investigation.“Since 2021, Nationwide has invested significantly in all aspects of its economic crime control framework in order to ensure our systems are robust,” they added.“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.”
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