FCA warns of “weaknesses” in some challenger banks’ fraud prevention
The UK’s financial regulator stopped short of naming names but said banks should be enhancing their systems.
In a review by the FCA of the challenger bank sector, which includes the 20-30 new banks created in the past decade, there was a need to improve how financial crime risk is assessed.
The regulator, which has a mandate to protect consumers as well as to contribute to stability in financial markets and systems, says some challenger banks are failing to “adequately check their customers’ income and occupation”.
In addition, it said, there were some instances where challenger banks did not have “financial crime risk assessments in place for their customers”.
The FCA stopped short of naming any specific banks, but did say it had identified a rise in the number of Suspicious Activity Reports - alerts to the National Crime Agency - of potential instances of money laundering or terrorist financing.
“Challenger banks are an important part of the UK’s retail banking offering. However, there cannot be a trade-off between quick and easy account opening and robust financial crime controls,” Sarah Pritchard, executive director for Markets at the FCA said.
“Challenger banks should consider the findings of this review and continue enhancing their own financial crime systems to prevent harm,” she added.
“Challenger and digital banks have experienced tremendous growth in their customer bases in recent years, however, this rapid scaling has meant that compliance programmes have not always kept pace. Dealing with increased volumes of customers and transactions while expanding into new markets has added complexity to anti-financial crime initiatives," said Henry Balani, Global Head of Industry and Regulatory Affairs for Encompass Corporation.