Monzo Could Be Gonzo After Regulatory Investigation

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Monzo Bank has been in financial danger for some time and now, in its latest annual report, has admitted that the UK’s Financial Conduct Authority (FCA) is investigating it for its compliance or otherwise with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

The annual report states: “The risk our plans don’t deliver the expected financial and non-financial benefits to our stakeholders, could also lead to a loss of confidence, reputational damage or difficulty fundraising. So as mentioned in Note 1 of the financial statements, the directors recognise this risk casts a material uncertainty over our ability to continue as a going concern.”

Last year’s annual report also stated that there were “material uncertainties that cast doubt on our ability to continue as a going concern”.

Investigation in progress

When asked whether the investigation was in progress, the FCA said “we always decline to comment on open investigations”. The phrase “going concern” appears 32 times in the report.

Regulatory concerns dogged the bank last year as well. One note read: “Following a regulatory review, in June 2020, we began a review of our financial crime control framework which is still ongoing. As the review is in progress, the outcome and implications can’t yet be assessed, although they could be material. We’ve therefore assessed these reviews to be non-adjusting post balance sheet events, any costs arising from them will be accounted for when it is appropriate.”

This year, references to regulatory action are more explicit.

“We said in last year’s annual report that we were starting a review of our financial crime controls framework after a regulatory review (relating to a … skilled person review under section 166 Financial Services and Markets Act 2000). The FCA formally told us to appoint the skilled person … in August 2020.

“This work is still ongoing, and in May 2021, the FCA notified us that it had started an investigation into our compliance with the Money Laundering Regulations 2017, potential breaches of some of the FCA Principles for Businesses and related FCA rules for anti-money laundering and financial crime systems and controls between 1 October 2018 to 30 April 2021.

“This investigation is looking into both potential civil and criminal liability. We’re cooperating with the FCA’s investigation, which is at an early stage.”

Contingent liabilities

The FCA’s investigation, the report goes on, “could have a material negative impact on our financial position. We may, from time to time, be party to claims arising in the ordinary course of business and have to give redress.”

In April last year, the bank made the difficult decision to close its office in Las Vegas, losing 165 staff. This it has now done.

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