The UK’s financial watchdog has said it is investigating digital bank Monzo over potential breaches of anti-money laundering and financial crime rules.
Monzo, which was founded in 2015 and is known for its hot coral bank cards, said it was cooperating with the investigation, which was in its early stages but could lead to civil and criminal charges.
The Financial Conduct Authority (FCA) notified Monzo about its inquiry in May this year, saying it was looking into potential breaches of UK rules related to anti-money laundering and financial crime controls between October 2018 and April 2021.
Last year, hundreds of Monzo customers complained that their accounts has been closed or frozen without explanation.
“The prevention of financial crime is an issue that affects the entire banking industry and one which Monzo is taking extremely seriously,” the bank said in a statement. “Over the past year we have made major investments in our controls in this area as a priority and will continue to invest heavily in this part of the business. The FCA’s investigation remains at an early stage. Our operations are unaffected and we remain committed to serving our customers.”
A spokesman for the FCA, which has been increasing its efforts to combat money-laundering across the financial sector in recent months, said the watchdog was not able to comment on the detail of open investigations.
In May, the FCA sent letters to chief executives of the UK’s retail banks, warning that some lenders needed to assess potential gaps in their anti-money laundering checks. The warning came only months after it announced it was launching criminal proceedings against NatWest, marking the first prosecution under anti-money laundering rules introduced in 2007.
Court proceedings have been delayed twice this year but were expected to start in mid-September.
The FCA investigation was disclosed in Monzo’s annual report, which showed the bank’s pre-tax losses widened 12% in the year to February to £130m, due primarily to higher costs for employee share awards and a property charge.
While the bank boasts 5 million customers and expects to report a monthly profit for the first time in 2022, its continued losses have put its future at risk, according to the report.
