The UK’s financial watchdog, Financial Conduct Authority (FCA), is investigating British digital bank Monzo over potential breaches of anti-money laundering and financial crime rules. The challenger bank is one of the several banks to which the financial watchdog sent letters in May this year, warning of failings in anti-money laundering controls.
Early-stage FCA investigation
The digital bank revealed this information as it released the company’s annual report at the end of July 2021 last week. “In May 2021, the FCA notified us that it had started an investigation into our compliance with the Money Laundering Regulations 2017, potential breaches of some of the FCA Principles for Businesses and related FCA rules for anti-money laundering and financial crime systems and controls between 1 October 2018 to 30 April 2021,” Monzo said in its annual report.
The fintech startup said it is complying fully with the FCA’s investigation. “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 report added. “The FCA’s investigation remains at an early stage. Our operations are unaffected and we remain committed to serving our customers. This could have a material negative impact on our financial position but we won’t know when or what the outcome will be for some time.”
Profitable, not yet
The investigation comes as a big blow to the fintech company, which also reported heavy losses for last year. Despite its consistently growing customer base, the digital bank has failed to become profitable. Monzo’s annual report said it has seen losses increased to £130 million for the year ending 28 February 2021, up from £114 million in the same period in 2020. There were material uncertainties that cast doubt on the bank’s ability to continue as a going concern last year and the 2021 report seems quite similar.
Growth in customer base
Monzo saw its customer deposits increase by over £1.7 billion to more than £3.1 billion in 2021 and the bank’s revenue also increased from £67 million in 2020 to £79 million in 2021. The startup also added more than a million customers over 2020, now counting more than 5 million users, has amassed over 770,000 business customers and a further 210,000 Monzo Plus and Monzo Premium customers. Those paying customers now account for 25% of the company’s revenue.
Account freeze
Founded in 2015 and known for its hot coral bank cards, the challenger bank that strives to ‘build a bank that lives on your smartphone’ had faced a slew of complaints from customers last year. Users of the bank had been reportedly locked out of their accounts without reason. As a response to this, the mobile app-based bank unblocked customers’ accounts and apologised.
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