The Financial Conduct Authority (FCA) has decided to drop its criminal investigation into Monzo, the online bank, over potential breaches of anti-money laundering rules. This decision follows a thorough two-year investigation that began in 2021.

The Financial Conduct Authority Drop Criminal Investigation

The FCA’s inquiry into Monzo commenced in 2021, scrutinising the bank’s activities for potential criminal breaches of anti-money laundering and financial crime regulations dating back to October 2018. The investigation opened up the possibility of criminal prosecutions against the bank.

However, in its latest annual report published on Monday, Monzo disclosed that the FCA had decided to discontinue assessing criminal liability. Instead, the regulator will continue its investigation as a civil matter, which may result in fines.

Monzo’s Financial Performance

Amid this regulatory scrutiny, Monzo has achieved a milestone by reporting its first annual profit since its inception nearly a decade ago. The bank announced a £15.4 million profit for the year ending March 2023, a remarkable turnaround from the previous year’s loss of £116 million.

Monzo’s success can be attributed to several factors. The bank added 2.3 million new customers over the past year, which significantly boosted its customer base. With the increase in customers, the bank has seen a substantial rise in deposits, which soared by 88% to £11.2 billion by the end of March. This influx of deposits, coupled with higher interest rates, has allowed Monzo to increase its revenue almost threefold to £880 million.

In addition to its financial achievements, Monzo is gearing up for further expansion. In March, the bank raised an additional £340 million in a fundraising round led by Google’s growth fund, CapitalG. This new capital is intended to support Monzo’s ongoing growth and expansion efforts.

One of the key initiatives in Monzo’s expansion strategy is the opening of a new office in Dublin. This move, scheduled for the next few months, aims to provide Monzo with a foothold in the European Union, enabling it to offer services in markets such as France and Germany. The FCA’s decision to drop the criminal investigation is a significant relief for Monzo, allowing the bank to focus on its growth and expansion plans. With its first annual profit, a rapidly growing customer base, and strategic expansion into European markets, Monzo appears well-positioned for continued success.

A Stark Reminder to Other Financial Businesses

While the investigation into Monzo has concluded with no action taken, the case offers a clear reminder to other financial businesses and banks as well as law firms about the importance of having effective AML protocols and procedures in place.

Monzo are not the only bank that have been under intense scrutiny because of money laundering and compliance concerns. Standard Chartered are facing allegations in the US relating to money laundering, TD Bank have set aside funds for potential fines while they are under investigation for compliance failings.

Other banks have felt the force of regulatory bodies who are keen to ensure regulations are met. The UBS Bank were fined by authorities in Switzerland for money laundering failings while an investment firm in Luxembourg were handed a significant €785,000 fine for compliance failings.

Regulation bodies across the globe are keen to stamp their authority and ensure regulations are met. Many have plans in place to combat money laundering and financial crime including The Serious Fraud Office who have recently outlined their new five year plan and The National Crime Agency who are taking a more proactive approach which includes educating and workshops but they have also demonstrated clear intentions to sanction and fine any businesses who fail to comply. Monza’s case will certainly serve as a clear reminder to all financial businesses the importance of having effective processes in place.