Metro Bank has been fined nearly £17m by the UK’s financial watchdog for failings in its money laundering controls over four years.
The Financial Conduct Authority (FCA) issued the £16.7m penalty after finding failures in monitoring 60m transactions over a four-year period that risked a “gap being left in the defence against the criminal use of the financial system”.
Problems persisted despite being raised by junior employees three years before they were completely resolved, the regulator said.
Metro said it accepted the FCA’s findings and has since resolved the monitoring system failings and enhanced its processes.
The challenger bank, which has 76 branches and 2.7 million customers, launched in the UK in 2010 as the first high street bank to open in more than 100 years.
From June 2016, Metro automated the monitoring of customer transactions for potential financial crime.
However, it was found that there were errors in how data was fed into the system that meant transactions that took place on the day an account was opened, and some further activities, were not monitored.
Despite junior staff members raising concerns in 2017 and 2018, the bank left it until 2019 to take action but this fix still failed to adequately monitor all transactions. It was not until December 2020, four-and-a-half years after the system was launched, that Metro was able to consistently check all transactions.
During that period, it is estimated that more than transactions with a value of £51bn were not monitored for money laundering risks during the incident.
Metro would have been fined £23.8m but was given a 30% discount under FCA rules after agreeing to resolve the problems. The company’s shares were largely unaffected by news of the fine.
Metro, co-founded by the US billionaire Vernon Hill, initially attracted a wave of customers after launching in the UK offering seven-day opening hours and dog-friendly branches.
However, in January 2019, it experienced the biggest single-day collapse in a UK bank’s share price since 2008, after it revealed a significant accounting mistake.
It had miscalculated the proportion of risky loans on its balance sheet, meaning Metro breached Bank of England rules that required banks to hold enough capital to cover potential losses.
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In December 2022, the FCA fined the bank and two of its former executives more than £10m for misleading investors during the incident.
Metro paid £10m, while the former chief executive Craig Donaldson and former chief financial officer David Arden were issued fines of £223,100 and £134,600 respectively. Donaldson and Arden appealed against the fines.
Last October, the bank was subject to a £925m rescue deal, in which the Colombian billionaire Jaime Gilinski Bacal took a majority stake.
The deal led to a turnaround in the bank’s fortunes, and a forecast by the bank in August predicted that it would return to profitability by the end of the year. On Tuesday, the bank said it had returned to profit on an “underlying basis” in October.
Commenting on the FCA fine, Daniel Frumkin, the chief executive of Metro Bank, said: “The conclusion of these inquiries draws a line under this legacy issue, allowing the bank to move forward and fully focus on the future, building on the solid foundations it has already laid.
“We are continuing, at pace, our shift towards higher yielding specialist mortgages and commercial, corporate and SME lending with a strong pipeline of business.”
Last month, the FCA fined another challenger bank – Starling – £29m for “shockingly lax” financial crime controls. The online bank “left the financial system wide open to criminals and those subject to sanctions”, the FCA said.