The City watchdog says it handed down its £21,091,300 fine to the digital bank for “inadequate anti-financial crime systems and controls” between October 2018 and August 2020.

The business also “repeatedly” breached a requirement preventing it from opening accounts for high-risk customers between August 2020 and June 2022.

Monzo, founded in 2015, saw its customer base jump almost tenfold from around 600,000 in 2018 to over 5.8 million in 2022.

But the regulator says: “Monzo’s financial crime controls failed to keep pace with its customer and product growth.

“In particular, Monzo failed to design, implement and maintain adequate customer onboarding, customer risk assessment and transaction monitoring systems to mitigate the risk of financial crime.

“These systemic failings resulted in the FCA requiring a comprehensive, independent review of the firm’s financial crime framework in August 2020.”

The watchdog also imposed requirements on the app-based bank that prevented it from opening new accounts for high-risk customers.

But the FCA says: “Between August 2020 and June 2022, it repeatedly failed to comply with the terms of the requirement, including signing up over 34,000 high-risk customers.”

FCA joint executive director of enforcement and market oversight Therese Chambers says: “Banks are a vital line of defence in the collective fight against financial crime.

“They must have the systems in place to prevent the flow of ill-gotten gains into the financial system. Monzo fell far short of what we, and society, expect.

“Monzo onboarded customers on the basis of limited, and in some cases, obviously implausible information – such as customers using well-known London landmarks as an address.

“This illustrates how lacking Monzo’s financial crime controls were. This was compounded by its inability to properly comply with the requirement not to onboard high-risk customers.”

Monzo has established and completed a financial crime change programme to remediate and enhance its wider financial crime control framework in line with recommendations made in the independent review.

The lender would have been fined £30.1m, but agreed to resolve these matters, qualifying for a 30% discount from the regulator.

The bank has since completed a programme to upgrade its financial crime controls in line with recommendations made in the independent review.

Monzo group chief executive TS Anil says: “The FCA’s findings relate to a historical period that ended three years ago and draw a line under issues that have been resolved and are firmly in the past — with our learnings at the time leading to substantial improvements in our controls.

“I’m pleased the FCA recognises the significant investments we have made, as well as our ongoing commitment to managing these risks today, as we go from strength to strength as a business approaching 13 million customers.”