Nationwide Fined for Failing to Detect £27M COVID Fraud

Nationwide has received a record fine after failing to detect a significant furlough fraud amounting to £27.3 million. The Financial Conduct Authority (FCA) imposed a penalty of £44 million on the British bank due to its inadequate monitoring systems.

Details of the Furlough Fraud

A key incident involved a Nationwide customer who deposited £26 million into their account within just eight days. This deposit followed a series of 24 furlough payments that totaled £27.3 million over a period of 13 months.

Recovery Efforts by HMRC

• HMRC successfully recovered £26.5 million from the fraudulent activities.
• Approximately £800,000 of the fraud remains unaccounted for.

Weaknesses in Monitoring Systems

The FCA’s findings revealed that, from October 2016 to July 2021, Nationwide lacked effective systems to maintain due diligence and risk assessments for personal account customers. This failure led to vulnerabilities in monitoring potential money laundering risks.

Regulatory Response

Dame Debbie Crosbie, the CEO of Nationwide, was appointed as the Government’s new Women in Finance champion just a day before the fine was announced. Therese Chambers of the FCA noted that Nationwide was aware of its customers misusing personal accounts for business transactions, which constituted a breach of terms since the bank did not offer business accounts at the time.

“Nationwide failed to get a proper grip of the financial crime risks lurking within its customer base,” Chambers stated. She emphasized the need for financial institutions to be vigilant in addressing such risks.

Nationwide’s Actions Following the Ruling

A spokesperson for Nationwide indicated that the bank had proactively identified the issues through its own review and reported them to the FCA. Originally facing a proposed fine of nearly £63 million, Nationwide received a 30% discount due to its cooperation in resolving the matter.

The £44 million fine marks the largest penalty ever levied against Nationwide. The bank expressed its commitment to improving its economic crime control measures and maintained that the identified issues did not lead to financial losses for its customers. “We are sorry that our controls during the period fell below the high standards we expect,” the spokesperson concluded.