Imagine waking up one morning to discover that someone has quietly funnelled £26 million pounds of dirty money through your bank account in less than two weeks. Sounds like the plot of a Hollywood thriller, right? Yet that’s pretty much what happened at Nationwide between 2016 and 2021 – and the Financial Conduct Authority has just made the building society pay dearly for it.
Last week the FCA handed Nationwide a £44 million fine, the biggest penalty it has ever imposed on the mutual. The reason? Seriously inadequate anti-money laundering systems that left the door wide open for criminals.
A £26 Million Red Flag Nobody Noticed
Let’s start with the jaw-dropping example that probably made the regulator’s blood boil.
One customer – later identified as a criminal – received £27.3 million in fraudulent Covid furlough claims over 13 months. Of that amount, an eye-watering £26 million landed in their personal Nationwide current account in just eight days. Eight. Days.
Most of us would get a polite phone call from the fraud team if we tried to pay in a £5,000 cheque that looked slightly dodgy. This account was apparently swallowing millions without so much as raising an eyebrow.
“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.”
Therese Chambers, FCA joint executive director of enforcement
That quote pretty much sums it up. The systems simply weren’t fit for purpose.
What Actually Went Wrong?
The FCA investigation uncovered a laundry list (pun intended) of problems between October 2015 and July 2021.
- Due diligence on new customers was patchy at best
- Transaction monitoring was ineffective – huge cash flows went unnoticed
- Risk assessments were outdated or simply not carried out
- The society knew some customers were using personal current accounts for business purposes – against its own terms – but didn’t have the processes to handle the extra risk that brings
At the time, Nationwide didn’t even offer proper business accounts. So anyone running a company through a personal account was automatically in a grey area the building society wasn’t equipped to police.
In practice that meant the mutual had no clear picture of which customers were high-risk and which weren’t. When you can’t see the risk, you can’t manage it. Simple as that.
The Fine Could Have Been Even Bigger
The original penalty was just under £63 million. Nationwide qualified for the standard 30 % discount because it cooperated fully and agreed to settle early. Even with the reduction, £44 million is real money – roughly what the society pays out in member bonuses some years.
For context, the FCA has now issued 13 AML-related fines to banks and building societies since 2021 totalling just under £301 million. The message is loud and clear: get your house in order or pay up.
How Nationwide Responded
Credit where it’s due – the society says it spotted the issues itself through internal reviews and voluntarily reported them to the regulator.
“Since 2021, Nationwide has invested significantly in all aspects of its economic crime control framework in order to ensure our systems are robust.”
Nationwide spokesperson
They also emphasise that no customers lost money as a direct result of these control failures, and they’ve been pouring resources into fixing the problems ever since.
Whether members feel that’s enough to restore trust is another question. I’ve always liked Nationwide’s mutual ethos for years, but news like this definitely makes you pause.
Why This Matters to Ordinary Savers
You might be thinking: “I’m not laundering money, so why should I care?” Fair point – but there are wider implications.
First, every pound spent on regulatory fines is a pound that doesn’t go towards better savings rates or lower mortgage deals. Mutual or not, big penalties eventually filter through to members.
Second, it’s a reminder that even the most trusted names can have shockingly lax controls behind the scenes. If Nationwide – generally seen as one of the “good guys” – can miss £26 million moving in eight days, what’s happening elsewhere?
And third, the crackdown on AML failures is only going to intensify. The FCA, the Treasury, and law enforcement are all under pressure to show they’re serious about dirty money flowing through the UK financial system.
What Banks Are Supposed to Do
Just in case you’re wondering what proper anti-money laundering controls actually look like, here’s the (very simplified) checklist every firm is meant to follow:
- Know your customer – proper ID checks and understanding what they do for a living
- Risk-rate every customer – PEPs, cash-heavy businesses, overseas links all score higher
- Monitor transactions in real time – unusual patterns trigger alerts
- Investigate alerts promptly and file Suspicious Activity Reports when needed
- Keep everything documented and audited
Nationwide apparently fell down on pretty much every step for a worrying number of accounts.
The Bigger Picture on Financial Crime
The National Crime Agency estimates that hundreds of billions of pounds are laundered through the UK every year. That’s not a typo – hundreds of billions.
Covid fraud alone is thought to have cost taxpayers somewhere between £5 billion and £8 billion. A chunk of that money inevitably ended up in bank accounts while systems were looking the other way.
When big institutions drop the ball, it undermines the whole fight against organised crime, terrorism financing, and human trafficking – the really ugly stuff that dirty money funds.
Look, nobody expects banks to catch every dodgy £50. But when £26 million can flow into a single personal account in eight days without anyone blinking, something has gone badly wrong.
Nationwide has taken its medicine and says the problems are fixed. Whether the fine really hurts a £270 billion balance-sheet giant is debatable, but the reputational damage is harder to shrug off.
For the rest of us, it’s another wake-up call. Even the friendliest building society on the high street can have skeletons in the server room. Maybe it’s time we all paid a bit more attention to where we keep our money – and who’s watching it.
Because if the good guys can miss something this big, what hope do the rest of us have?
