Icons for the Monzo and Starling banking apps on a smartphone.
Adrian Dennis | AFP by way of Getty Photographs
Britain’s online-only challenger banks wish to do extra to stop the abuse in their platforms via criminals, regulators have warned.
The Monetary Habits Authority on Friday revealed the findings of a evaluation into monetary crime controls at a number of U.Ok. challenger banks — more youthful banks arrange with the purpose of taking up incumbent lenders.
The FCA did not title any companies however mentioned its evaluation considering six challenger banks, part of which have been virtual banks. Jointly, those corporations lined greater than 8 million consumers, the watchdog mentioned. The evaluation excluded e-money issuers and cost products and services suppliers, like Revolut and Sensible.
The regulator mentioned it discovered weaknesses in challenger banks’ due diligence assessments on consumers, with some companies failing to adequately assess the danger of monetary crime when onboarding new purchasers. In some instances, challenger banks didn’t have buyer chance tests in position initially, it added.
“Challenger banks are the most important a part of the United Kingdom’s retail banking providing,” Sarah Pritchard, govt director of markets on the FCA, mentioned in a observation Friday.
“On the other hand, there can’t be a trade-off between fast and simple account opening and strong monetary crime controls. Challenger banks will have to imagine the findings of this evaluation and proceed improving their very own monetary crime programs to stop hurt.”
Fintech companies are underneath power to beef up their monetary crime controls, in particular within the wake of financial sanctions imposed on Russia over its unprovoked invasion of Ukraine.
Fintech-friendly rules within the U.Ok. have allowed a large number of upstart lenders together with Monzo and Starling to flourish. However there is been rising fear from regulators that a few of these more recent entrants could have extra lax controls than the ones of established banks, given their platforms are designed to make making use of for an account or mortgage sooner and more straightforward.
Going ahead, the FCA mentioned it expects challenger banks to increase their defenses in opposition to monetary crime to mirror their person enlargement, and adapt their due diligence measures to take the heightened chance of sanctions evasion under consideration.
Final yr, the preferred app-based financial institution Monzo disclosed an investigation via the FCA into doable breaches of anti-money laundering rules. On the time, the company mentioned the probe used to be “at an early level,” and that it is cooperating with the regulator.
