Nationwide has been hit with a record fine after failing to spot a customer’s £27.3m furlough fraud.
The Financial Conduct Authority (FCA) has ordered the British lender to pay £44m as a result of its failings, which included the incident during Covid.
The City watchdog revealed in a ruling on Friday that a Nationwide customer deposited £26m into their current account over the space of eight days, having received 24 furlough payments totalling £27.3m over 13 months.
HMRC was able to recover £26.5m from the fraud, but roughly £800,000 remains unaccounted for.
The FCA added that between October 2016 and July 2021, Nationwide had ineffective systems for keeping up to date with due diligence and risk assessments for all its personal current account customers.
The fine was announced just a day after Dame Debbie Crosbie, the chief executive of Nationwide, was appointed as the Government’s new Women in Finance champion.
As part of its findings, the FCA said the bank was aware of its customers using personal accounts for business transactions, which was a breach of its terms because it did not yet offer business accounts.
This left Nationwide unable to effectively monitor money-laundering risks, the regulator said.
Therese Chambers, of the FCA, said: “Nationwide failed to get a proper grip of the financial crime risks lurking within its customer base.
“It took too long to address its flawed systems and weak controls, meaning red flags were missed with serious consequences.
“Building societies and banks have a key role in the fight against financial crime. Firms must remain vigilant in this fight.”
A Nationwide spokesman said it had identified the issues through its own review and voluntarily brought them to the attention of the FCA.
The bank would have been fined almost £63m, but qualified for a 30pc discount after fully cooperating with the FCA and agreeing to resolve the issues. The £44m fine is the biggest Nationwide has ever received.
Nationwide said it has since invested significantly in its economic crime control framework, adding that it did not believe that the issues caused financial loss to any of its customers.
“We are sorry that our controls during the period fell below the high standards we expect,” the spokesman added.
