Nationwide Fined £44m for Financial Crime Control Failures

The Financial Conduct Authority (FCA) has imposed a £44 million penalty on Nationwide Building Society for serious deficiencies in its anti-financial crime controls over nearly five years. The regulator found that Britain's largest building society failed to maintain adequate systems between October 2016 and July 2021, leaving the financial system exposed to significant risks including the misappropriation of £27.3 million in fraudulent pandemic furlough payments.

The enforcement action highlights ongoing challenges in the UK's financial crime prevention framework, despite regulatory expectations that banks and building societies serve as the frontline defense against money laundering and fraud. The fine comes amid intensified scrutiny of financial institutions' compliance systems as authorities contend with increasingly sophisticated criminal networks exploiting banking services.

Background and Context

Nationwide's compliance failures occurred during a critical period that included the COVID-19 pandemic, when government support schemes created new vulnerabilities for financial crime. The building society, which serves approximately 16 million members, acknowledged that its systems were inadequate for monitoring customer transactions and maintaining up-to-date due diligence on account holders. These gaps meant that red flags suggesting suspicious activity were systematically missed despite regulatory guidance requiring enhanced vigilance during the pandemic period.

The FCA's investigation revealed that Nationwide was aware some customers were using personal accounts for business purposes—a violation of the society's terms—yet failed to implement appropriate monitoring processes. This systemic weakness persisted despite the fact that Nationwide did not offer business current accounts during the relevant period, meaning it lacked the necessary infrastructure to assess and mitigate the associated risks.

Key Figures and Entities

Nationwide Building Society, founded in 1846, stands as the world's largest building society, with assets exceeding £250 billion. The case involved regulatory action from the Financial Conduct Authority, the UK's primary financial services regulator responsible for ensuring markets function well and consumers are protected. Therese Chambers, the FCA's Joint Executive Director of Enforcement and Market Oversight, emphasized the seriousness of the failures, noting that Nationwide "failed to get a proper grip of the financial crime risks lurking within its customer base."

The investigation also involved cooperation with His Majesty's Revenue and Customs (HMRC), which recovered £26.5 million of the fraudulent furlough payments, though approximately £800,000 remains outstanding. The case centered on a single customer who received 24 fraudulent payments totaling £27.3 million over 13 months, with £26.01 million deposited over just eight days—a pattern that should have triggered immediate investigation under proper anti-money laundering protocols.

Legal and Financial Mechanisms

The FCA's enforcement action was taken under its regulatory powers to enforce compliance with the Money Laundering Regulations and other financial crime prevention requirements. The £44 million penalty reflects the seriousness of the breaches and the potential harm caused to the integrity of the UK's financial system. Nationwide acknowledged the shortcomings and has since undertaken significant improvements to its control systems, though the fine serves as a reminder of the regulator's expectation that financial institutions maintain robust defenses against criminal exploitation from the outset.

The case illustrates how inadequate customer due diligence and transaction monitoring can create opportunities for large-scale fraud. Under UK financial regulations, banks and building societies are required to conduct regular risk assessments of their customer base, implement appropriate monitoring systems, and file suspicious activity reports with the National Crime Agency when they identify transactions that may involve criminal proceeds. Nationwide's failure in these fundamental obligations created a loophole that was exploited during the pandemic when legitimate government support schemes were being abused by organized criminals.

International Implications and Policy Response

The enforcement action against Nationwide occurs within the broader context of international efforts to strengthen financial crime prevention following scandals that exposed systemic vulnerabilities in major banking institutions globally. The UK has positioned itself as a leader in anti-money laundering regulation, with recent initiatives including the creation of the UK Financial Intelligence Unit and enhanced powers for the FCA to supervise financial crime controls. However, this case demonstrates that significant gaps remain in the practical implementation of these frameworks.

The fine coincides with ongoing parliamentary scrutiny of the UK's economic crime regime, including the Economic Crime and Corporate Transparency Bill currently before Parliament. Legislators have increasingly focused on the responsibility of financial institutions to prevent their services from being exploited for criminal purposes, with growing consensus that penalties must be sufficient to drive cultural change within organizations. The case may inform future regulatory approaches, particularly regarding how financial institutions manage customers who blur the line between personal and business banking activities.

Sources

This report draws on the Financial Conduct Authority's enforcement notice, Nationwide Building Society's corporate statements, and HMRC data on pandemic support schemes published between 2016 and 2024.