Nationwide fined £44m for anti-money laundering failures that enabled COVID fraud

Nationwide Building Society has been fined £44 million by the Financial Conduct Authority for systemic failures in anti-money laundering controls that allowed fraudulent COVID-19 furlough payments to flow through personal accounts undetected.

The regulator found that between October 2016 and July 2021, Britain's largest building society operated with inadequate systems to identify and monitor financial crime risks among its customer base, creating vulnerabilities that were exploited during the pandemic.

Background and Context

The enforcement action follows a period of intense scrutiny on financial institutions' role in preventing fraud during the COVID-19 pandemic. According to FCA findings, Nationwide's failures were long-standing and systemic, predating the public health crisis but creating conditions that facilitated large-scale fraud.

The building society acknowledged awareness of control weaknesses but failed to implement timely remediation, only commencing a comprehensive transformation programme in July 2021 after the regulatory investigation was underway.

Key Figures and Entities

Nationwide Building Society, the UK's second-largest mortgage provider, operated without business current account offerings during the period in question, forcing many business customers—including potentially fraudulent ones—to use personal accounts for commercial activities.

The Financial Conduct Authority, led in this enforcement action by Therese Chambers, joint executive director of enforcement and market oversight, imposed the £44 million penalty and highlighted the society's failure to maintain proper oversight of suspicious transactions.

His Majesty's Revenue & Customs (HMRC) recovered £26.5 million of the £27.3 million in fraudulent furlough payments that flowed through Nationwide accounts, but approximately £800,000 remains unrecovered.

Legal and Financial Mechanisms

The case exposed critical weaknesses in Nationwide's transaction monitoring systems and customer due diligence processes. According to FCA documentation, the society failed to maintain adequate risk assessments for personal current account customers, many of whom were using their accounts for business purposes in violation of account terms.

In the most serious incident, a customer received 24 furlough payments totaling £27.3 million over 13 months, with £26.01 million deposited in just eight days—an obvious red flag that went undetected by Nationwide's monitoring systems. This pattern of rapid, large-value deposits should have triggered immediate compliance alerts but instead went unremarked.

International Implications and Policy Response

The Nationwide case highlights broader systemic vulnerabilities in global financial crime prevention frameworks, particularly during periods of rapid government disbursement programs like pandemic relief. The enforcement action reinforces expectations that financial institutions must maintain robust anti-money laundering systems capable of adapting to emerging fraud vectors.

Following similar enforcement actions against other institutions, the FCA has intensified its focus on ensuring banks and building societies maintain adequate controls to prevent their services from being exploited for financial crime, particularly during periods of unusual transaction patterns like those seen during pandemic relief programs.

Sources

This report draws on FCA press releases, regulatory documentation, and HMRC public statements regarding the recovery of fraudulent COVID-19 support payments.